Accounting1 Chapter 8 (Completing the Accounting Cycle)

Accrual

To grow and accumulate over time.

Time Period Concept

Assumes accounting will take place in fiscal periods.

Adjusting Entry

A journal entry that assigns an amount of revenue or expense to the appropriate accounting period, bringing the balance sheet to its true value.

Revenue Recognition Principle

Recording revenue as soon as it is earned

Matching Principle

Matching the expense to the revenue it helps earn

Cost Principle

Assets are recorded at the historical cost

Principle of Conservatism

Assets cannot be overstated or understated, it is always better to err on the side of caution.

Taking Inventory

At the end of the fiscal period, supplies that are left over by the business are counted and valued

Unearned Revenue

Revenue for which the cash has been received, but the good/service has not been provided

Real accounts

Accounts that have balances that continue into the next fiscal period

Nominal accounts

Account that have balances that do not continue into the next fiscal period

Closing the account

Means to cause it to have no balance

Depriciation

Refers to an allowance made for the decrease in the value of an asset over time.

Amortization

Means to transfer value.

Accumulated Amortization

The total amount of amortization expense over the life of an account

Accumulated Depreciation Account

Known as a valuation or contra account