Accounting Cycle Adjustments

These flashcards cover key vocabulary and concepts related to the accounting cycle, including types of accounts, accounting principles, and processes for adjustments made at the end of accounting periods.

Accounting Cycle

A series of steps that a business goes through to track and manage its financial transactions over a specific period.

Accrual Basis Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Assets

Resources owned by a business that have economic value and can provide future benefits.

Liabilities

Obligations or debts that a business owes to outsiders.

Trial Balance

A statement that lists all the accounts and their balances to verify that total debits equal total credits.

Adjusting Entries

Entries made at the end of an accounting period to update accounts before preparing financial statements.

Prepaid Expenses

Payments made for expenses that will benefit future periods, recorded as assets until they are incurred.

Supplies Expense

The cost associated with supplies used during a period, recognized as an expense on the income statement.

Matching Principle

An accounting principle that states expenses should be recorded in the same period as the revenues they help to generate.

Journal Entry

The recording of a transaction in the accounting system, showing the accounts affected and their respective debits and credits.

Debit

An entry on the left side of an account that increases asset or expense accounts and decreases liability or equity accounts.

Credit

An entry on the right side of an account that increases liability or equity accounts and decreases asset or expense accounts.

Expenses

Costs incurred in the process of generating revenues, recorded on the income statement.

Closing the Books

The process of completing all necessary accounting entries at the end of an accounting period.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and not expected to be converted to cash within a year.

Salaries Payable

A liability account that represents salaries owed to employees for work performed but not yet paid.