Accounting Terms

Accounting Terms Learn Basic Accounting Terms

Accounting - process of identifying, measuring, and reporting financial information of an entity Accounting Equation - assets = liabilities + equity Accounts Payable - money owed to creditors, vendors, etc. Accounts Receivable - money owed to a business, i.e. credit sales Accrual Accounting - a method in which income is recorded when it is earned and expenses are recorded when they are incurred, all independent of cash flow Accruals - a list of expenses that have been incurred and expensed, but not paid or a list of sales that have been completed, but not yet billed

 gradual reduction of amounts in an account over time, either assets Amortization –  gradual or liabilities Asset - property with a cash value that is owned by a business or individual Audit Trail –  a  a record of every transaction, when it was done, by whom and where, used by auditors when validating the financial statement Auditors – third  – third party accountants who review an entity’s financial statements for accuracy and provide a statement to that effect Balance Sheet - summary of a company's financial status, including assets, liabilities, and equity Bookkeeping - recording financial information

 the process of assigning forecasted income and expenses to accounts, Budgeting –  the which amounts will be compared to actual income and expense for analysis of variances  –  found  found in the equity portion of the balance sheet describing the Capital Stock  –  number of shares sold to shareholders at a predetermined value per share, also called “common stock” or “preferred stock”

 found in the equity portion of the balance sheet accounting for Capital Surplus –  found the amount shareholders paid that is greater or lesser than the “capital stock” amount  expenses that are accumulated, not expensed as incurred, to Capitalized Expense –  expenses  be amortized amortized over a period period of time; time; i.e. the development development cost of a new product product Chart of Accounts - a listing of a company's accounts and their corresponding numbers Cash-Basis Accounting - a method in which income and expenses are recorded when they are paid. Cash Flow - a summary of cash received and disbursed showing the beginning and ending amounts

 the process of reversing the income and Closing the Books/Year End Closing  –  the expense for a fiscal or calendar yea r and netting the amount into “retained earnings” Cost Accounting - a type of accounting that focuses on recording, defining, and reporting costs associated with specific operating functions Credit - an account entry with a negative value for assets, and positive value for liabilities and equity. Debit - an account entry with a positive value for assets, and negative value for liabilities and equity.

 separating operating divisions into their own sub Departmental Accounting –  separating entities on the income statement, showing individual income, expenses, and net  profit by entity entity Depreciation - recognizing the decrease in the value of an asset due to age and use

 amounts paid to shareholders out of current or retained earnings Dividends –  amounts Double-Entry Bookkeeping - system of accounting in which every transaction has a corresponding positive and negative entry (debits and credits) Equity - money owed to the owner or owners of a company, also known as "owner's equity" Financial Accounting - accounting focused on reporting an entity's activities to an external party; ie: shareholders

Financial Statement - a record containing the balance sheet and the income statement Fixed Asset - long-term tangible property; building, land, computers, etc. General Ledger - a record of all financial transactions within an entity

 an intangible asset reflecting the value of an entity in excess of its Goodwill –  an tangible assets Income Statement - a summary of income and expenses

 merchandise purchased for resale at a profit Inventory –  merchandise  the method to set the book value of unsold inventory: i.e. Inventory Valuation –  the “LIFO,” last in, first out; “FIFO,” first in, first out; “average,” an average cost over a given period, “last cost,” the cost based on the last purchase; “standard,” a “deemed” amount related to but not tied to a specific purchase, “serialized,” based on a uniquely identifiable serial number or character of each inventory item  the original billing from the seller to the buyer, outlining what was Invoice –  the  purchased and and the terms terms of sale, payment, payment, etc. etc. Job Costing - system of tracking costs associated with a job or project (labor, equipment, etc) and comparing with forecasted costs Journal - a record where transactions are recorded, also known as an "account" Liability - money owed to creditors, vendors, etc Liquid Asset - cash or other property that can be easily converted to cash Loan - money borrowed from a lender and usually repaid with interest

 – an account on the general ledger that subtotals the “subsidiary Master Account – an accounts” accounts” assigned to it; i.e. Cash might be the master account for a list of depository accounts at banks Net Income - money remaining after all expenses and taxes have been paid Non Cash Expense - recognizing the decrease in the value of an asset; i.e. depreciation and amortization Non-operating Income - income generated from non-recurring transactions; transactions; ie: sale of an old building

Note - a written agreement to repay borrowed money; sometimes used in place of "loan" Operating Income - income generated from regular business operations Other Income - income generated from other than regular business operations, i.e. interest, rents, etc. Payroll - a list of employees and their wages

 – the process of entering then permanently saving or “archiving” Posting – the accounting data Profit - see "net income" Profit/Loss Statement - see "income statement" Reconciliation –  the  the process of matching one set of data to another; i.e. the bank statement to the check register, the accounts payable journal to the general ledger, etc.

 the amount of net profit retained and not paid out to Retained Earnings –  the shareholders shareholders over the life of the business Revenue - total income before expenses. Shareholder Equity - the capital and retained earnings in an entity attributed to the shareholders Single-Entry Bookkeeping - system of accounting in which transactions are entered into one account Statement of Account - a summary of amounts owed to a vendor, lender, etc.

 the subaccounts that are totaled on the financial statement Subsidiary Accounts –  the under “master accounts;” i.e. “Cash“Cash -ABC Bank” might be one of several subsidiary accounts that are subtotaled under “Cash”  assets purchased to be consumed by the entity Supplies –  assets  –  shares  shares purchased by the entity from shareholders, reducing Treasury Stock  –  shareholder equity Write-down/Write-off  –   –  an  an accounting entry that reduces the value of an asset due to an impairment of that asset; i.e. the account receivable from the bankrupt customer