account
A systematic arrangement that shows the effect of transactions and other events on a specific element (asset, liability, and so on).
accounting cycle
Standard set of accounting procedures to record transactions and prepare financial statements
accounting information system
A system that collects and processes transaction data and then disseminates the financial information to interested parties
accrued expenses
Expenses incurred but not yet paid or recorded at the statement date. Examples are interest, rent, taxes, and salaries
accrued revenues
Revenues earned but not yet received in cash or recorded at the statement date.
adjusted trial balance
A trial balance prepared from a company's ledger accounts after journalizing and posting all adjusting entries.
adjusting entry
Adjustments made at the end of the accounting period to ensure that a company has recorded revenues in the period in which it earns them and recognized expenses in the period in which it incurs them�in other words, that it has followed the revenue recogni
balance sheet
Financial statement that shows the financial condition of a company at the end of a period by reporting its assets, liabilities, and owners' equity
book value
The difference between a depreciable asset's cost and its related accumulated depreciation.
closing entries
Journal entries made at the end of a company's annual accounting period to transfer the balances of temporary accounts to a permanent owners' equity account (retained earnings or a capital account, depending on the company's form of organization).
closing process
Accounting process at the end of the accounting period that reduces the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period's transactions.
contra asset account
An account that offsets an asset account on the balance sheet.
credit
The right side of an account
debit
The left side of an account
depreciation
The process of allocating the cost of an asset to expense over its useful life in a rational and systematic manner.
double-entry accounting
universally used accounting system in which a company records the dual (two-sided) effect of each transaction in appropriate accounts.
event
A happening of consequence, which generally is the source or cause of changes in assets, liabilities, and equity
financial statements
he principal means through which a company communicates its financial information. These statements reflect the collection, tabulation, and final summarization of the accounting data. The statements most frequently provided are (1) the balance sheet, (2)
general journal
A complete record of a company's transactions or other financial events, listed chronologically and expressed in terms of debits and credits made to accounts.
general ledger
A list of all of a company's asset, liability, stockholders' equity, revenue, and expense accounts
income statement
Financial statement that measures the results of operations during a particular period and presents those results in terms of net income or net loss
journal
The "book of original entry" where the company initially records transactions and selected other events.
ledger
The book (or computer printouts) containing the accounts.
nominal accounts
Revenue, expense, and dividend accounts; except for dividends, these accounts appear on the income statement.
post-closing trial balance
The trial balance after closing entries are made; consists only of asset, liability, and owners' equity accounts (the real accounts).
prepaid expenses
paid for and recorded before a company uses them. Prepaid expenses expire either with the passage of time (e.g., rent and insurance) or through use and consumption (e.g., supplies).
real accounts
Asset, liability, and equity accounts; these accounts appear on the balance sheet. Companies do not close real accounts, also called permanent accounts.
reversing entries
Journal entries, made at the beginning of the next accounting period, that are the exact opposite of the adjusting entries made in the previous period
special journals
Records of transactions possessing a common characteristic, such as cash receipts, sales, purchases, cash payments.
statement of cash flows
Financial statement that reports the cash provided and used by operating, investing, and financing activities during the period.
statement of retained earnings
Financial statement that reconciles the balance of the retained earnings account from the beginning to the end of the period.
T-account
Basic account form, shaped like the letter T, that shows the effect of transactions on particular asset, liability, stockholders' equity, revenue, and expense accounts
transaction
external event involving a transfer or exchange between two or more entities
trial balance
The list of all open accounts, in the sequence in which they appear in the ledger, and their balances
unearned revenues
received in cash and recorded as liabilities before a company earns them.
accrual basis
The recognition of revenue when it is earned, and the expenses in the period incurred, without regard to the time of receipt or payment of cash
modified cash basis
A mixture of the accrual basis and cash basis, with modifications that have substantial support, such as capitalizing and depreciating plant assets or recording inventory
strict cash basis
Companies record only when they receive cash, and they record expenses only when they disburse cash
worksheet
An informal device for accumulating and sorting information needed for the financial statements.