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Accounting Essential Definitions: Accrual and Adjusting Entry

What is accrual in accounting? What is accrued expense? What is adjusting entry? You can get the answer on this page.

  • Accruals – Adjusting entries for either accrued revenues or accrued expenses.
  • Accrual-basis accounting – Accounting basis in which companies record transactions that change a company’s financial statements in the periods in which the events occur.
  • Accrued expenses – Expenses incurred but not yet paid in cash or recorded.
  • Accrued revenues – Revenues earned but not yet received in cash or recorded.
  • Deferrals – Adjusting entries for either prepaid expenses or unearned revenues.
  • Adjusting entries – Entries made at the end of an accounting period to ensure that companies follow the revenue recognition and matching principles.
  • Adjusted trial balance – A list of accounts and their balances after the company has made all adjustments.
  • Book value – The difference between the cost of a depreciable asset and its related accumulated depreciation.
  • Calendar year – An accounting period that extends from January 1 to December 31.
  • Cash-basis accounting – Accounting basis in which companies record revenue when they receive cash and an expense when they pay cash.
  • Contra-asset account – An account offset against an asset account on the balance sheet.
  • Fiscal year – An accounting period that is one year in length.
  • Interim periods – Monthly or quarterly accounting time periods.
  • Matching principle – The principle that companies match efforts (expenses) with accomplishments (revenues).
  • Prepaid expenses – Expenses paid in cash that benefit more than one accounting period and that are recorded as assets.
  • Revenue recognition principle – The principle that companies recognize revenue in the accounting period in which it is earned.
  • Time period assumption – An assumption that accountants can divide the economic life of a business into artificial time periods.
  • Unearned revenues – Cash received and recorded as liabilities before revenue is earned.
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