ch4 keywords

Accrued expenses

Expenses incurred but not yet paid in cash, recorded at the end of the period by an adjusting entry.

Accrued revenues

Revenues earned but not yet received in cash, recorded at the end of an accounting period by an adjusting entry.

Adjusted trial balance

A list of accounts and their balances after all adjusting journal entries have been recorded and posted.

Adjusting entries

Journal entries made at the end of an accounting period to update accounts for the proper recognition of revenues and expenses.

Carrying amount

Amount at which an asset is recognized in the statement of financial position, can refer to individual assets or the company's assets as a whole.

Cash basis accounting

An accounting basis where revenue is recorded only when cash is received, and an expense is recorded only when cash is paid.

Closing entries

Journal entries at the end of an accounting period to transfer the balances of temporary accounts to the Retained Earnings account.

Contract-based approach

Recognizes revenue when an entity satisfies a performance obligation in a contract by delivering a promised good or service.

Depreciation

The process of allocating the cost of a depreciable asset over its useful life.

Earnings-based approach

Recognizes revenue when performance is substantially complete and collection is reasonably assured.

Expense recognition

The process of recording an expense related to a decrease in an asset or increase in a liability in the course of ordinary activities.

Income Summary

A temporary account used in closing revenue and expense accounts, summarizing their balances before closing to Retained Earnings.

Performance obligation

A company’s requirement to provide goods or services to a customer as outlined under a contract.

Permanent accounts

Accounts whose balances are carried forward to the next accounting period.

Post-closing trial balance

A list of permanent accounts and their balances after closing entries have been journalized and posted.

Revenue recognition

The process of recording revenue when there is an inflow of future economic benefits resulting from an increase in an asset or decrease in a liability.

Temporary accounts

Revenue, expense, and dividends declared accounts whose balances are transferred to Retained Earnings at the end of an accounting period.

Unadjusted trial balance

A list of accounts and their balances before adjusting journal entries have been made.

Useful life

The length of service of a depreciable asset.

Variable consideration

The amount in the transaction price of a contract resulting from discounts, refunds, price concessions, and similar factors affecting expected payments.