Accrual The recognition of an expense or revenue that has arisen but has not yet been recorded.

Accrual accounting "The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur, rather than only in the periods in which cash is received or paid by the business; all the techniques developed by accountants to apply the matching rule."

Accrued expenses Expenses incurred but not recognized in the accounts; unrecorded expenses.

Accrued revenues Revenues for which a service has been performed or goods delivered but for which no entry has been made; unrecorded revenues.

Accumulated depreciation accounts Contra-asset accounts used to accumulate the depreciation expense of specific long-lived assets.

Adjusted trial balance A trial balance prepared after all adjusting entries have been recorded and posted to the accounts.

Adjusting entries Entries made to apply accrual accounting to transactions that span more than one accounting period.






Carrying value The unexpired portion of the cost of an asset. Also called book value.

Cash basis of accounting Accounting for revenues and expenses on a cash received and cash paid basis.

Continuity issue The difficulty associated with not knowing how long a business entity will survive.

Contra account An account whose balance is subtracted from an associated account in the financial statements.






Deferral The postponement of the recognition of an expense that already has been paid or of a revenue that already has been received.

Depreciation The portion of the cost of a tangible long-term asset allocated to any one accounting period. Also called depreciation expense.






Expenses Decreases in stockholders’ equity resulting from the costs of goods and services used up in the course of earning revenues. Also called cost of doing business or expired costs.






Fiscal year Any 12-month accounting period used by an economic entity.






Going concern "The assumption, unless there is evidence to the contrary, that a business entity will continue to operate indefinitely."






Matching rule "Revenues must be assigned to the accounting period in which the goods are sold or the services performed, and expenses must be assigned to the accounting period in which they are used to produce revenue."






Net income The net increase in stockholders’ equity that results from business operations and is accumulated in the Retained Earnings account; revenues less expenses when revenues exceed expenses.

Net loss The net decrease in stockholders’ equity that results from business operations when expenses exceed revenues. It is accumulated in the Retained Earnings account.






Periodicity "The recognition that net income for any period less than the life of the business, although tentative, is still a useful measure."

Prepaid expenses Expenses paid in advance that have not yet expired; an asset account.

Profit The increase in stockholders’ equity that results from business operations.






Revenue recognition "In accrual accounting, the process of determining when revenue is earned."

Revenues "Increases in stockholders’ equity resulting from selling goods, rendering services, or performing other business activities."






Unearned revenues Revenues received in advance for which the goods have not yet been delivered or the services performed; a liability account.