| Accounting period | Length of time covered by financial statements; also called reporting period.
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| Accrual basis accounting | Accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP.
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| Accrued expenses | Costs incurred in a period that are both unpaid and unrecorded; adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilities.
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| Accrued revenues | Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets); adjusting entries for recording accrued revenues involve increasing assets and increasing revenues.
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| Adjusted trial balance | List of accounts and balances prepared after periodend adjustments are recorded and posted.
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| Adjusting entry | Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount and update the related expense or revenue account.
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| Annual financial statements | Financial statements covering a one-year period; often based on a calendar year, but any consecutive 12-month (or 52-week) period is acceptable.
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| Book value | Asset's acquisition costs less its accumulated depreciation (or depletion, or amortization); also sometimes used synonymously as the carrying value of an account.
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| Cash basis accounting | Accounting system that recognizes revenues when cash is received and records expenses when cash is paid.
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| Contra account | Account linked with another account and having an opposite normal balance; reported as a subtraction from the other account's balance.
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| Depreciation | Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset.
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| Fiscal year | Consecutive 12-month (or 52-week) period chosen as the organization's annual accounting period.
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| Interim financial statements | Financial statements covering periods of less than one year; usually based on one-, three-, or six-month periods.
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| Matching principle | Prescribes expenses to be reported in the same as the revenues that were earned as a result of the expenses.
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| Natural business year | Twelve-month period that ends when a company's sales activities are at their lowest point.
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| Plant assets | Tangible long-lived assets used to produce or sell products and services; also called property, plant and equipment (PP&E) or fixed assets.
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| Prepaid expenses | Items paid for in advance of receiving their benefits; classified as assets.
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| Profit margin | Ratio of a company's net income to its net sales; the percent of income in each dollar of revenue; also called net profit margin.
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| Straight-line depreciation | Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life.
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| Time period principle | Assumption that an organization's activities can be divided into specific time periods such as months, quarters, or years.
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| Unadjusted trial balance | List of accounts and balances prepared before accounting adjustments are recorded and posted.
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| Unearned revenue | Liability created when customers pay in advance for products or services; earned when the products or services are later delivered.
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