Financial Accounting Chapter 3 Terms

accounting basis in which companies record transactions that change a company’s financial statements in the periods in which the events occur

adjusting entries for either accrued revenues or accrued expenses

expenses incurred but not yet paid in cash or recorded
Debit: Expense
Credit: Liabilities

revenues for services performed but not yet received in cash or recorded
Debit: Asset
Credit: Liabilities

a list of accounts and their balances after the company has made all adjustments

entries made at the end of an accounting period to ensure that companies follow the revenue recognition and expense recognition principles

the difference between the cost of a depreciable asset and its related accumulated depreciation

an accounting period that extends from January 1 to December 31

accounting basis in which companies record revenue when they receive cash and an expense when they pay cash

an account offset against an asset account on the balance sheet

adjusting entries for either prepaid expenses or unearned revenues

the process of allocating the cost of an asset to expense over its useful life

(matching principle) the principle that companies match efforts (expenses) with accomplishments (revenues)

an accounting period that is one year in length

monthly or quarterly accounting time periods

(prepayments) expenses paid in cash before they are used or consumed
Debit: Expense
Credit: Asset

the principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied

an assumption that accountants can divide the economic life of a business into artificial time periods

a liability recorded for cash received before services are performed
Debit: Liabilities
Credit: Revenue

the length of service of a long-lived asset