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Key Terms

  • Accrual Basis Accounting: Recording transactions when they occur, not when cash changes hands
  • Accrued Expenses: Expenses incurred but not yet paid or recorded
  • Accrued Revenues: Revenues earned but not yet received or recorded
  • Adjusted Trial Balance: Trial balance prepared after adjusting entries
  • Adjusting Entries: Journal entries made at period end to update accounts
  • Depreciation: Systematic allocation of asset cost over useful life
  • Matching Principle: Expenses recorded in same period as related revenues
  • Prepaid Expenses: Expenses paid in advance, recorded as assets
  • Provision: Estimated liability for future obligations
  • Revenue Recognition Principle: Revenue recorded when earned, not when cash received
  • Time Period Concept: Business activities divided into specific periods for reporting
  • Unearned Revenues: Cash received in advance for future services, recorded as liabilities