Accounting Chapter 3 Test Bank by Horngren's

Accrual Basis Accounting - Answer Accounting method that records revenues when earned and expenses when incurred. Accrued Expense - Answer An expense that the business has incurred but has not yet paid. Accrued Revenue - Answer A revenue that has been earned but for which the cash has not yet been collected. Accumulated Depreciation - Answer The sum of all the depreciation expense recorded to date for a depreciable asset. Adjusted Trial Balance - Answer A list of all the accounts with their adjusted balances. Adjusting Entry - Answer An entry made at the end of the accounting period that is used to record revenues to the period in which they are earned and expenses to the period in which they occur. Book Value - Answer A depreciable asset's cost minus accumulated depreciation. Cash Basis Accounting - Answer Accounting method that records revenues only when cash is received and expenses only when cash is paid. Contra Account - Answer An account that is paired with, and is listed immediately after, its related account in the chart of accounts and associated financial statement and whose normal balance is the opposite of the normal balance of the related account. Deferred Expense - Answer An asset created when a business makes advance payments of future expenses. Deferred Revenue - Answer A liability created when a business collects cash from customers in advance of completing a service or delivering a product. Depreciation - Answer The process by which businesses spread the allocation of a plant asset's cost over its useful life.