Professional Documents
Culture Documents
All of the steps in the accounting process including analyzing and recording transactions, posting entries, adjusting and closing the accounts, and preparing financial statements; the accounting system.
Accounts Receivable
Short-term monetary assets that arise from sales on credit to customers at either the wholesale or the retail level.
Accrual Accounting
The reporting of revenues from sales in the period in which they are sold, regardless of when the cash is received, and the reporting of expenses in the period of purchase, regardless of when the payment is made.
Accrued Expense
An expense that has been incurred but is not recognized in the accounts, necessitating an adjusting entry; an unrecorded expense.
Accrued Revenue
A revenue for which the service has been performed or the goods have been delivered that has not been recorded in the accounts; an unrecorded revenue.
Accumulated Depreciation
A contra-asset account used to accumulate the total past depreciation on a specific long-lived asset.
Adjusting Entry
An entry made to apply accrual accounting to transactions that span more than one accounting period or any adjustment needed to make the accounts in balance.
Balance Sheet
A financial statement that shows the financial position of a business at a particular date.
Bank Reconciliation
The process of accounting for the differences between the balance appearing on the bank statement and the balance of cash according to the depositor's records.
Bond
A security, usually long-term, representing money borrowed by a corporation from the investing public.
Book Value
The total assets of a company less total liabilities; owners' equity; Fixed Assets less Depreciation.
Break-Even Point
The point in financial analysis at which total revenue equals total cost incurred and at which a company begins to generate a profit.
Capital Expenditure
An expenditure for the purchase of expansion of plant assets.
Closing Entries
Journal entries made at the end of the accounting period that set the stage for the next accounting period by closing the expense and revenue accounts of the balances and transferring the net amount to the owner's capital account or retained earnings; clearing entries.
Compound Entry
A journal entry that has more than one debit and/or credit entry.
Compound Interest
The interest cost for two or more periods, if one assumes that after each period the interest of that period is added to the amount of which interest is computed in future periods. In other words, compound interest is interest earned on a principal sum that is increased at the end of each period by the interest of that period.
Contra Account
An account whose balance is subtracted from an associated account in the financial statements.
Convertible Bonds
Bonds that may be exchanged for other securities of the corporation, usually common stock.
Cost Center
Any organizational segment or area of activity for which it is desirable to accumulate costs.
Coupon Bonds
Bonds whose owners are not registered with the issuing corporation but that have interest coupons attached.
Credit
The right side of an account.
Current Assets
Cash or other assets that are reasonably expected to be realized in cash or sold during a normal operating cycle of a business or within one year if the operating cycle is shorter than one year.
Current Liabilities
Obligations or debts that are due to be paid within the normal operating cycle of the business or within one year, whichever is longer.
Current Ratio
A measure of liquidity; current assets divided by current liabilities.
Debit
The left side of an account.
Declining-Balance Method
An accelerated method of depreciation.
Deficit
A debit balance in the Retained Earning account.
Depreciation
The periodic allocation of the cost of a tangible long-lived asset over its estimated useful life.
Discount
To take out the interest on a promissory note in advance (verb); the amount of the interest deducted (noun).
Double-Entry System
A system of recording business transactions requiring that each transaction have equal debit and credit totals, thereby maintaining a balance within the accounts taken as a whole.
Exchange Rate
The value of one currency in terms of another.
Expenditure
A payment or incurrence of an obligation to make a future payment for an asset or service rendered.
Expenses
The costs of the goods and services used up in the process of obtaining revenue; expired cost.
Extraordinary Items
Events or transactions that are distinguished by their unusual nature and the infrequency of their occurrence.
Fixed Assets
Another name, no longer in wide use, for long-term non-monetary assets.
Fixed Cost
A cost that remains constant in total within a relevant range of volume or activity.
FOB Destination
A term relating to transportation charges meaning that the supplier bears the transportation costs to the destination.
Freight In
Future Value
The amount that an investment will be worth at a future date if invested at compound interest.
Goodwill
The excess of the cost of a group of assets (usually a business) over the market value of the assets individually.
Gross Income
Income from all sources, less allowable exclusions.
Gross Profit
The difference between revenue from sales and cost of goods sold; also called gross profit from sales.
Gross Sales
The total sales for cash and on credit for a given accounting period.
Horizontal Analysis
The computation of dollar amount changes and percentage changes from year to year.
Income Statement
A financial statement that shows the amount of income earned by a business over an accounting period.
Income Summary
A nominal account used during the closing process in which are summarized all revenues and expenses before the net amount is transferred to the capital account or retained earnings.
Intangible Assets
Long-term assets that have no physical substance but have a value based on rights or privileges accruing to the owner.
Interest
The cost associated with the use of money for a specific period of time.
Inventory Turnover
A ratio that measures the relative size of inventory.
Journalizing
The process of recording transactions in a journal.
Leasehold Improvement
An improvement to leased property that becomes the property of the lessor at the end of the lease.
Leverage
The use of debt financing.
Liability
A debt of the business; an amount owed to creditors, employees, government bodies, or others; a claim against assets.
Liquidation
The process of ending a business; entails selling assets, paying liabilities, and distributing any remaining assets to the partners.
Long-Term Liabilities
The debts of a business that fall due more than one year ahead, beyond the normal operating cycle, or are to be paid out of non-current assets.
Lower-of-Cost-or-Market
A method of inventory pricing under which the inventory is priced at cost or market, whichever is lower.
Marketable Securities
An investment in securities which are readily marketable; temporary investments.
Market Value
The price investors are willing to pay for a share of stock on the open market.
Merchandise Inventory
The goods on hand and available for sale to customers.
Net Income
The net increase in owners' equity resulting from the profit seeking operations of a company; net income = revenue expenses.
Operating Expenses
The expenses other than cost of goods sold incurred in the operation of a business; especially selling and administrative expenses.
Owner's Equity
The resources invested by the owner of the business; asset - liabilities = owner's equity; also called residual equity.
Par Value
The amount printed on each share of stock, which must be recorded in the capital stock accounts; used in determining the legal capital of a corporation.
Posting
The process of transferring journal entry information from the journal to the ledger.
Preferred Stock
A type of stock that has some preference over common stock, usually including dividends.
Prepaid Expenses
The expenses paid in advance that do not expire during the current accounting period; an asset account.
Present Value
The amount that must be invested now at a given rate of interest to produce a given future value.
Profit Margin
A measure of profitability; the percentage of each sales dollar that results in net income; net income divided by sales.
Purchase Order
A document prepared by the accounting department authorizing a supplier to ship specified goods or provide specified services.
Purchases Journal
A type of special-purchase journal in which are recorded credit purchases of merchandise (if it is a single-column journal) or credit purchases in general (if it is a multi-column journal).
Quick Ratio
A ratio that measures the relationship of the more liquid current assets (cash, marketable securities, and accounts receivable) to current liabilities.
Receivable Turnover
A ratio that measures the relative size of accounts receivable.
Residual Value
The estimated net scrap, salvage, or trade-in value of a tangible asset at the estimated date of disposal; also called salvage value or disposal value.
Retained Earnings
The stockholders' equity that has arisen from retaining assets from earnings in the business; the accumulated earnings of a corporation from its inception minus any losses, dividends, or transfers to contributed capital.
Return on Assets
A measure of profitability that shows how efficiently a company is using all its assets.
Reversing Entries
The entries made after the closing of records for one accounting period that reverse certain adjusting entries; designed to aid in routine bookkeeping the next accounting period. Usually used to accrue expenses that will be paid next period.
Sales Discounts
The discounts given to customers for early payment for sales made on credit; a contra sales account.
Sales Journal
A type of special-purpose journal used to record credit sales.
Simple Interest
The interest cost for one or more periods, if one assumes that the amount on which the interest is computed stays the same from period to period.
Stockholder's Equity
The owners' equity section of a corporation's balance sheet.
Straight-Line Method
A method of depreciation that assumes that depreciation is dependent on the passage of time and that allocates an equal amount of depreciation to each period of time.
Subchapter S Corporation
A corporation established by the owners of small businesses to gain some of the legal benefits of incorporation while still being taxed as a partnership.
Subsidiary
A company whose stock is more than 50% owned by another company.
Subsidiary Ledger
A ledger separate from the general ledger; contains a group of related accounts the total of whose balances equal the balance of a controlling account in the general ledger.
T Account
A form of an account which has a physical resemblance to the letter T; used to analyze transactions.
Tangible Assets
Long-term assets that have physical substance (e.g. equipment, automobiles).
Tax Liability
The amount of tax that must be paid based on taxable income and the applicable tax table.
Trial Balance
A listing of accounts in the general ledger with their debit or credit balances in respective columns and a totaling of the columns; used to test the equality of debit and credit balances in the ledger.
Uncollectible Accounts
The accounts received from customers who cannot or will not pay.
Unearned Revenue
A revenue received in advance for which the goods will not be delivered or the services performed during the current accounting period; a liability account.
Vertical Analysis
The calculation of percentages to show the relationship of the component parts of a financial statement to the total in the statement.
Voucher
A written authorization prepared for each expenditure in a voucher system
Working Capital
The amount by which the total current assets exceed total current liabilities.