CB Bookkeeper key terms

An accounting method that records revenue when it is earned and expenses when they are incurred, regardless of when cash moves. Period-end adjusting entries keep the records consistent with this method.

A journal entry made at the end of an accounting period to move amounts into the period where they belong. It usually pairs one income statement account with one balance sheet account.

An expense that has been incurred but is not yet paid or recorded, such as wages earned in the last days of a period. The adjustment debits the expense and credits a payable.

A payment made in advance for something not yet used, such as insurance or rent. It is recorded as an asset and gradually charged to expense as the benefit is consumed.

Cash a customer pays before the business performs the work or delivers the goods. It sits as a liability until the obligation is met, then it becomes revenue.

The rule that expenses are recorded in the same period as the revenues they helped produce. It is the reason for many period-end adjustments, including accruals and depreciation.

An account linked to a related account that carries the opposite normal balance, so it reduces the amount reported. Accumulated depreciation and allowances for doubtful accounts are common examples.

A list of every general ledger account and its balance, with debits in one column and credits in another. Equal totals prove the math is consistent but do not prove the records are correct.

A mistake made by swapping two digits within a number, such as recording fifty-four instead of forty-five. The resulting out-of-balance difference is always evenly divisible by nine.

A transaction left out of the accounting records completely. Because nothing was recorded on either side, the trial balance still balances and the mistake is found only by review.

Recording a transaction in a way that breaks accounting rules, such as expensing a long-term asset purchase instead of depreciating it. The entries still balance but the statements are wrong.

A journal entry that fixes an error already in the books, typically by reversing the incorrect amount and recording the correct one. It preserves the audit trail instead of erasing the original.

A temporary account that holds amounts which cannot yet be classified or that are needed to make a trial balance agree. Its balance must be cleared before statements are issued.

The total an employee earns in a pay period before anything is subtracted. It includes regular wages, overtime, bonuses, and commissions.

The amount an employee actually receives after all deductions are taken out of gross pay. Also called take-home pay, it is the cash the employer pays out.

An amount withheld from an employee's gross pay, whether required by law such as income tax, or voluntary such as a retirement contribution or insurance premium.

The federal law that funds Social Security and Medicare through payroll taxes. Employees and employers each pay a set percentage of covered wages, and the employer remits the total.

Taxes an employer owes on its own behalf, calculated from employee wages, including its share of Social Security and Medicare plus unemployment taxes. They are a business expense, not an employee deduction.

The annual statement an employer sends each employee and the tax authorities, showing total wages paid and taxes withheld for the year. It is typically due by the end of January.

The systematic allocation of a long-lived asset's cost across the periods that benefit from using it. It spreads an expense over time and does not measure what the asset could be sold for.

A method that spreads the depreciable cost of an asset evenly over its useful life. Annual expense equals cost minus salvage value, divided by the number of years in service.

An accelerated method that applies a fixed percentage to the asset's remaining book value each year. Expense is larger in the early years and smaller later.

A method that calculates depreciation from how much an asset is actually used, such as miles driven or units produced, rather than from the passage of time.

The estimated amount an asset will still be worth when the business stops using it, also called residual value. It is subtracted from cost to find the total amount to depreciate.

The cost of an asset minus all depreciation recorded against it so far. It is the carrying amount shown on the balance sheet, not an estimate of market worth.

A contra asset account that gathers all the depreciation expense charged on an asset since it was purchased. It grows each period and reduces the asset's book value.

A method that updates the inventory balance and cost of goods sold with every purchase and sale. It gives a running record and supports closer control over stock.

A method that updates inventory only at the end of a period, after a physical count. Purchases go into a temporary account and cost of goods sold is calculated at period end.

First-in, first-out is an inventory costing method that assumes the oldest units are sold first. When prices are rising it reports lower cost of goods sold and higher ending inventory.

A hands-on tally of the goods actually on hand at a point in time. It checks the recorded balance and reveals losses from theft, damage, spoilage, or paperwork mistakes.

The cost of the inventory a business sold during a period, reported as an expense. It can be computed as beginning inventory plus purchases minus ending inventory.

The gap between the inventory the records show and what a physical count actually finds, caused by theft, damage, spoilage, or clerical mistakes. It is written off as an expense.

The policies and procedures a business uses to protect its assets, keep records reliable, and encourage compliance with laws. Good controls also shrink the chance for fraud.

Dividing work so that no one person can authorize a transaction, record it, and also handle the related cash or assets. This makes fraud hard to commit and hide alone.

The process of comparing the company's own cash records with the bank statement and explaining every difference. It uncovers errors and unauthorized transactions and is a core cash control.

A check the business has written and recorded that has not yet cleared the bank. It is a reconciling item that leaves the bank statement balance lower than the book balance.

The three conditions usually present when fraud occurs: pressure or incentive, opportunity, and rationalization. Controls mainly work by closing off the opportunity.

A control that compares the purchase order, receiving report, and supplier invoice before a payment is approved. All three must agree before cash leaves the business.

The documented path showing how a transaction started, how it was recorded, and how it reached the reports. It lets reviewers trace entries back to source documents.