Accounting Cycle Flashcards

30 vocabulary flashcards focusing on key concepts in the accounting cycle and related terms.

Adjustments

Updating accounts that were not recorded during the accounting period.

Accrual Accounting

Basis for adjustments to record income and expenses earned or incurred during the period.

Revenue Recognition

The principle of recognizing revenues and expenses in the correct accounting period.

Accrued Expense

Expenses incurred but not yet paid; must be recorded at the end of the accounting period.

Accrued Revenue

Revenues earned but not yet received; must be recorded in the period earned.

Deferred Expense

Expenses paid in advance and recorded as an asset until they are used. Includes office supplies.

Unearned Revenue

Revenues received before they are earned; recorded as a liability until earned.

Pre-collections initially recorded in liability account have been earned

Depreciation

The systematic allocation of the depreciable amount of a non-current asset over its useful life.

Doubtful Accounts

A portion of the Accounts Receivable may not be collected due to the risk involved in granting credit

Estimates of accounts receivable that may not be collected.

Merchandise Inventory

The value of unsold goods at the end of an accounting period.

Journalizing

The process of recording transactions in a journal.

Posting

The process of transferring entries from the journal to the ledger.

Matching Principle

Revenues and expenses should be recorded in the same accounting period.

Direct Write-off Method

An accounting method where bad debts are directly written off as an expense.

Allowance Method

An accounting method that charges Doubtful Accounts Expenses and estimated losses from uncollectible accounts.

Depreciable Cost/Value/Amount

The cost of an asset minus its residual value.

Amount subject to depreciation.

Useful Life

The estimated period over which an asset is expected to be available for use.

Residual Value

The estimated amount (selling price) that can be obtained from the sale of an asset at the end of its useful life.

Accumulated Depreciation

The total amount of depreciation that has been recorded for an asset.

Carrying Amount

The value at which an asset is recognized after deducting accumulated depreciation.

Market Value

The price that would be received to sell an asset or paid to transfer a liability.

Prepaid Expense

Expenses paid in advance but not yet incurred; recorded as an asset.

Unearned Revenue

Payments received before services are rendered or goods are delivered.

Depreciation Rate

A percentage used to calculate depreciation expense based on the useful life of an asset.

Straight-Line Method

A method of depreciation that evenly allocates the cost of an asset over its useful life.

Merchandise Inventory, end

The unsold portion of inventory at the end of an accounting period.

Adjustment Entry

The journal entry made at the end of an accounting period to update accounts.

Expense Recognition

The accounting principle defining when expenses should be recognized.

Accrual Basis of Accounting

An accounting method that recognizes revenues and expenses when they are incurred, regardless of cash flow.

Depreciation Expense

The periodic allocation of the cost of a depreciable asset.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company.

Trial Balance

A report that lists the balances of all accounts to check the accuracy of the books.

Financial Statements

Reports prepared at the end of an accounting period to summarize financial performance and position.