Oscar
A method of accounting in which revenues are generally recorded when earned (rather than when cash is received) and expenses are matched to the periods in which they help produce revenues (rather than when cash is paid).
accrual-based accounting
accounts that have a balance that is opposite of the balance in the related account.
contra-account
previously unrecorded expenses that have been incurred, but not yet paid in cash.
accrued expense
previously unrecorded revenues that have been earned but for which no cash has yet been received.
accrued revenues
journal entries that are made at the end of an accounting period to record the completed portion of partially completed transactions.
adjusting entries
an updated trial balance that reflects the changes to account balances as the result of adjusting entries.
adjusted trial balance
liability arising from the receipt of cash for which revenue has not yet been earned.
unearned (deferred) revenue
asset arising from the payment of cash which has not been used or consumed by the end of the period.
deferred/prepaid expense
accounts of asset, liability, and stockholders’ equity items whose balances are carried forward from the current accounting period to future accounting periods.
permanent account
a method of accounting in which revenue is recorded when cash is received, regardless of when it is actually earned. Similarly, an expense is recorded when cash is paid, regardless of when it is actually incurred; does not tie recognition of revenues and expenses to the actual business activity but rather to the exchange of cash.
cash-basis accounting
the accounts of revenue, expense, and dividend items that are used to collect the activities of only one period.
temporary account
allows companies to artificially divide their operations into time periods so they can satisfy users’ demands for information.
time-period assumption
the process whereby companies systematically allocate the cost of their tangible operating assets (other than land) as an expense in each period in which the asset is used.
depreciation
Under this principle, revenue is recognized, or recorded, in the period in which a company satisfies its performance obligation, or promise within a contract.
revenue recognition principle
this principle requires that expenses be recorded and reported in the same period as the revenue that it helped to generate
expense recognition principle