Key Terms - Chapter 3

Key Terms - Chapter 3 - Accounting cycle- Recurring steps...

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Accounting cycle- Recurring steps performed each accounting period, starting with analyzing transactions and continuing through the post-closing trial balance (or reversing entries). Accounting period- Length of time covered by financial statements; also called reporting period. Accrual basis accounting- Accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP. Accrued expenses- Costs incurred in a period that are both unpaid and unrecorded; adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilities. Accrued revenues- Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets); adjusting entries for recording accrued revenues involve increasing assets and increasing revenues. Adjusted trial balance- List of accounts and balances prepared after period-end adjustments are recorded and posted. Adjusting entry- Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount and update the related expense or revenue account. Annual financial statements- Financial statements covering a one-year period; often based on a calendar year, but any consecutive 12-month (or 52-week) period is acceptable. Book value- Asset's acquisition costs less its accumulated depreciation (or depletion, or amortization); also
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Key Terms - Chapter 3 - Accounting cycle- Recurring steps...

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