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RETL 261

Terms

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Matching Principle
Guide to accounting expenses. Identify all expenses incurred during the period, measure the expenses, and match them against the revenues earned during that same time period.
Accrued Expense
An expense that the business has incurred but not yet paid.
Adjusted Trial Balance
A list of all the accounts with their adjusted balances.
Adjusting Entry
Entry made at the end of the period to assign revenues to the period in which they are earned and expenses to the period in which they are incurred. These entries help measure the period's income and bring the related asset and liability accounts to correct balances for the financial statements.
Unearned Revenue
A liability created when a business collects cash from customers in advance of doing work. Also called deferred revenue.
Accumulated Depreciation
The cumulative sum of all the depreciation expense recorded for an asset.
Cash-Basis Accounting
Accounting that records transactions only when cash is received or paid.
Book Value
The asset's cost minus the accumulated depreciation.
Plant Asset
Long-lived tangible assets - such as land, buildings, and equipment - used in the operation of a business.
Contra Account
A account that always has a companion account and whose normal balance is opposite that of the companion account.
Accrual Accounting
Accounting that records the impact of a business event as it occurs regardless of whether the transaction affected cash
Prepaid Expense
Advance payment of expenses. Examples include prepaid rent, prepaid insurance, and supplies.
Time-Period Concept
Ensures that information is reported at regular intervals.
Depreciation
The allocation of a plant asset's cost to the expense over its useful life.
Deferred Revenue
A liability created when a business collects cash from customers in advance of doing work. Also called unearned revenue.
Accrued Revenue
A revenue that has been earned but not yet collected in cash.
Revenue Principle
The basis for recording expenses; tells accountants when to record revenue and the amount of revenue to record.

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