Accrual
A revenue that has been earned or an expense that has been incurred but has not been recorded.
Accrual basis of accounting
A basis of accounting under which revenues and expenses are reported on the income statement in the period in which they are earned or incurred.
Accumulated Depreciation
The contra asset account credited when recording the depreciation of a fixed asset.
Adjusted trial balance
The trial balance prepared after all the adjusting entries have been posted.
Adjusting entries
The journal entries that bring the accounts up to date at the end of the accounting period.
Adjusting process
An analysis and updating of the accounts when financial statements are prepared.
Book value of the asset (or net book value)
The difference between the cost of a fixed (plant) asset and its accumulated depreciation.
Cash basis of accounting
A basis of accounting under which revenues and expenses are reported on the income statement in the period in which cash is received or paid.
Contra accounts (or contra asset accounts)
An account offset against another account.
Deferral
A future revenue or expense initially recorded as a liability or asset.
Depreciate
To lose value or usefulness over time.
Depreciation
The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
Depreciation expense
The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.
Fixed (plant) assets
Physical resources that are owned and used by a business and are permanent or have a long life; long-term or relatively permanent tangible assets such as equipment, machinery, buildings, and land that are used in normal business operations.
Matching principle
A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.
Vertical analysis
An analysis that compares each item in a cur-rent statement with a total or key amount within the same statement.
