| A | B |
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| Account form balance sheet | balance sheet that lists assets on the left side and liabilities and equity on the right |
| 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 (debiting) expenses and increasing (crediting) 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 (debiting) assets and increasing (crediting) revenues |
| Adjusted trial balance | list of accounts and balances prepared after 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 | equals the asset's original costs less its accumulated depreciation |
| Cash basis accounting | accounting system that recognizes revenues when cash is received and records expenses when cash is paid |
| Contra account | account linked with another account and having an opposite normal balance; reported as a subtraction from the other account's balance |
| Depreciation | expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset |
| Fiscal year | consecutive 12 months (or 52 weeks) chosen as the organization's annual accounting period |
| Interim financial statements | financial statements covering periods of less than one year; usually based on one-, three-, or six-month periods |
| Matching principle | requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses |
| Natural business year | 12-month period that ends when a company's sales activities are at their lowest point |
| Plant and equipment | tangible long-lived assets used to produce or sell products and services; also called fixed assets |
| Prepaid expenses | items paid for in advance of receiving their benefits; classified as an asset |
| Profit margin | ratio of a company's net income to its net sales; the percent of profit in each dollar of revenue |
| Report from balance sheet | balance sheet that lists accounts vertically in the order of assets, liabilities, and equity |
| Straight-line depreciation method | allocates equal amounts of an asset's cost (less any salvage value) to depreciation expense during its useful life |
| Time period principle | assumes an organization's activities can be divided into specific time periods such as months, quarters, or years |
| Unadjusted trial balance | list of accounts and balances prepared before adjustments are recorded and posted |
| Unearned revenues | cash (or other assets) received in advance of providing products or services; a liability |
