Vocabulary

Fiscal period

the length of time for which a business summarizes its financial information and reports its financial performance

Fiscal year

a fiscal period consisting of 12 consecutive months

Work sheet

a columnar accounting form used to summarize the general ledger information needed for financial statements

Trial balance

a proof of the equality of debits and credits in a general ledger

Prepaid expense

Cash paid for an expense in one fiscal period that is not used until a later period

Accrual Basis of Accounting

reporting income when it is earned and expenses when they are incurred

Cash Basis of Accounting

reporting income when cash is received and expenses when the cash is paid

Adjestments

changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

Balance sheet

A financial statements that reports the value of a business's assets, liabilities, and owner's equity on a specific date

Income statement

a financial statement showing the revenue and expenses for a fiscal period

Net income

the difference between total revenue and total expenses when total revenue is greater

Net loss

The difference between total revenue and total expenses when total expenses are greater

Adjusting entries

journal entries recorded to update general ledger accounts of the end of a fiscal period

Adjusting trial balance

a trial balance prepared after adjusting entries are posted