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    Key Terms Introduced or Emphasized in Chapter 4

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    Faryal Mughal
    This document introduces key accounting terms that were emphasized in Chapter 4, including accrual, accumulated depreciation, adjusted trial balance, adjusting entries, book value, contra-asset account, depreciable assets, depreciation, immaterial, matching principle, materiality, prepaid expenses, realization principle, straight-line method of depreciation, and unearned revenue. It provides brief definitions for each term in 1-2 sentences.

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    Key Terms Introduced or Emphasized in Chapter 4

    Uploaded by

    Faryal Mughal
    33 views2 pages
    This document introduces key accounting terms that were emphasized in Chapter 4, including accrual, accumulated depreciation, adjusted trial balance, adjusting entries, book value, contra-asset account, depreciable assets, depreciation, immaterial, matching principle, materiality, prepaid expenses, realization principle, straight-line method of depreciation, and unearned revenue. It provides brief definitions for each term in 1-2 sentences.

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    This document introduces key accounting terms that were emphasized in Chapter 4, including accrual, accumulated depreciation, adjusted trial balance, adjusting entries, book value, contra-asset account, depreciable assets, depreciation, immaterial, matching principle, materiality, prepaid expenses, realization principle, straight-line method of depreciation, and unearned revenue. It provides brief definitions for each term in 1-2 sentences.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    33 views2 pages

    Key Terms Introduced or Emphasized in Chapter 4

    Uploaded by

    Faryal Mughal
    This document introduces key accounting terms that were emphasized in Chapter 4, including accrual, accumulated depreciation, adjusted trial balance, adjusting entries, book value, contra-asset account, depreciable assets, depreciation, immaterial, matching principle, materiality, prepaid expenses, realization principle, straight-line method of depreciation, and unearned revenue. It provides brief definitions for each term in 1-2 sentences.

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    KEY TERMS INTRODUCED OR EMPHASIZED IN CHAPTER 4

    accrue To grow or accumulate over time; for example, interest expense.


    Accumulated Depreciation A contra-asset account shown as a deduction from
    the related asset account in the balance sheet. Depreciation taken throughout the
    useful life of an asset is accumulated in this account.
    adjusted trial balance A schedule indicating the balances in ledger accounts
    after end-of-period adjusting entries have been posted. The amounts shown in the
    adjusted trial balance are carried directly into financial statements.
    adjusting entries Entries made at the end of the accounting period for the
    purpose of recognizing revenue and expenses that are not properly measured as a
    result of journalizing transactions as they occur.
    book value The net amount at which an asset appears in financial statements. For
    depreciable assets, book value represents cost minus accumulated depreciation.
    Also called carrying value.
    contra-asset account An account with a credit balance that is offset against or
    deducted from an asset account to produce the proper balance sheet amount for
    the asset.
    depreciable assets Physical objects with a limited life. The cost of these assets
    is gradually recognized as depreciation expense.
    depreciation The systematic allocation of the cost of an asset to expense during
    the periods of its useful life.
    immaterial Something of little or no consequence. Immaterial items may be
    accounted for in the most convenient manner, without regard to other theoretical
    concepts.
    matching (principle) The accounting principle of offsetting revenue with the
    expenses incurred in producing that revenue. Requires recognition of expenses in
    the periods that the goods and services are used in the effort to produce revenue.
    materiality The relative importance of an item or amount. Items significant
    enough to influence decisions are said to be material. Items lacking this
    importance are considered immaterial. The accounting treatment accorded to
    immaterial items may be guided by convenience rather than by theoretical
    principles.

    prepaid expenses Assets representing advance payment of the expenses of future


    accounting periods. As time passes, adjusting entries are made to transfer the
    related costs from the asset account to an expense account.
    realization (principle) The accounting principle that governs the timing of
    revenue recognition. Basically, the principle indicates that revenue should be
    recognized in the period in which it is earned.
    straight-line method of depreciation The widely used approach of recognizing
    an equal amount of depreciation expense in each period of a depreciable assets
    useful life.
    unearned revenue An obligation to deliver goods or render services in the
    future, stemming from the receipt of advance payment.
    useful life The period of time that a depreciable asset is expected to be useful to
    the business. This is the period over which the cost of the asset is allocated to
    depreciation expense.

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