| Accrual basis accounting | Accounting system that recognizes revenues when earned and expenses as they occur; 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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| Adjusted trial balance | List of accounts and balances prepared after period-end 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 cost less its accumulated depreciation; 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 recognizes expenses as cash is paid; not consistent with GAAP.
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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 the asset is 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 period as the revenues earned as a result of those expenses.
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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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| Revenue recognition principle | Prescribes that revenue is recognized on the income statement in the period it is earned.
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| Straight-line depreciation method | Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage value) to each accounting period in its useful life.
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| Time period assumption | Assumption that an organization's activities can be divided into specific time periods such as months 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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