Accounting -- chapter 3 -- terms

accural accounting -- accounting that records the impact of a business event as it occurs, regardless of whether the transaction affected cash
Cash- basis accounting -- accounting that records transactions only when cash is received or paid
revenue principle -- the bases for recording revenues; tells accountants when to record revenue in the amount of revenue to record
matching principle -- guide to accounting for expenses. Identify all expenses occurred during the period, measure the expenses, and match them against revenues earned during the same time period
Time-period concept -- ensures that information is reported at regular intervals
adjusting entry -- entry made at the end of the period to assign revenues to the period in which they are earned in expenses to the period in which they are incurred. Adjusting entries help measure the period's income and bring the related asset and liability accounts to correct balances for the financial statements
prepaid expense -- advance payments of expenses. Examples include prepaid rent, prepaid insurance, and supplies
Plant assets -- long-lived tangible assets such as land, buildings, and equipment -- use in the operation of business
depreciation -- the allocation of a plant assets cost to expense over its useful life
accumulated depreciation -- the cumulative sum of all depreciation expense recorded for an asset
Contra account -- an account always has a companion account and use normal balance is opposite that of the companion account
book value (of a plant asset) -- the assets cost minus accumulated depreciation
accrued expense -- an expense that the business has incurred but not yet paid
accrued revenue -- a revenue that has been earned but not yet collected in cash
unearned revenue -- a liability created when a business collects cash from customers in advance of doing work. Also called deferred revenue