Term
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Definition
| Recurring steps performed each accounting period, starting with analyzing transactions and continuing through the post-closing trial balance (or reversing entries). |
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Term
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Definition
| Length of time covered by financial statements; also called reporting period. |
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Term
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Definition
| Accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP. |
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Term
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Definition
| Costs incurred, in a period, that are both unpaid and unrecorded; adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilities. |
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Definition
| Reveuneus earned in a period that are both unrecorded and not yet received in cash (or other assets); adjusting entries for recording accrued revenues involve increasing assets and increasing revenues. |
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Term
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Definition
| List of accounts and balances prepared after period-end adjustments are recorded and posted. |
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Term
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Definition
| Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount and update the related expense or revenue account. |
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Term
| Annual financial statements |
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Definition
| Financial statements covering a one-year period; often based on a calendar year, but any consecutive 12-month (or 52-week) period is acceptable. |
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Term
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Definition
| Accounting system that recognizes revenues when cash is received and records expenses when cash is paid. |
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Term
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Definition
| Balance sheet that presents assets and liabilities in relevant subgroups, including current and noncurrent classifications. |
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Term
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Definition
| Entries recorded at the end of each accounting period to transfer end-of-period balances in revenue, gain, expense, loss, and withdrawal (dividend for a corporation) accounts to the capital account (to retained earnings for a corporation). |
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Term
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Definition
| Account linked with another account and having an opposite normal balance; reported as a subtraction from the other account’s balance. |
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Term
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Definition
| Cash and other assets expected to be sold, collected, or used within one year or the company’s operating cycle, whichever is longer. |
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Term
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Definition
| Obligations due to be paid or settled within one year or the company’s operating cycle, whichever is longer. |
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Term
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Definition
| Ratio used to evaluate a company’s ability to pay its short term obligations, calculated by dividing current assets by current liabilities. |
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Term
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Definition
| Expense created by allocating the cost of plan and equipment to periods in which they are used; represents the expense of using the asset. |
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Term
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Definition
| Consecutive 12-month (or 52 –week) period chosen as the organization’s annual accounting period. |
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Term
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Definition
| Temporary account used only in the closing proves to which the balances of revenue and expense accounts (including any gains or losses) are transferred; its balance is transferred to the capital account (or retained earnings for a corporation). |
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Term
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Definition
| Long-term assets (resources) used to produce or sell products or services; usually lack physical form and have uncertain benefits. |
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Term
| Interim financial statements |
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Definition
| Financial statements covering periods of less than one year; usually based one-, three-, or six-month periods. |
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Term
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Definition
| Long-term assets not used in operating activities such as notes receivable and investments in stocks and bonds. |
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Term
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Definition
| Obligations not due to be paid within one year or the operating cycle, whichever is longer. |
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Term
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Definition
| Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses. |
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Term
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Definition
| Twelve-month period that ends when a company’s sales activities are at their lower point. |
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Term
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Definition
| Normal time between paying cash for merchandise or employee services and receiving cash from customers. |
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Term
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Definition
| Tangible long-lived assets used to produce or sell products and services; also called property, plant and equipment (PP&E) or fixed assets. |
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Term
| Post-closing trail balance |
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Definition
| List of permanent accounts and their balances from the ledger after all closing entries are journalized and posted. |
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Term
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Definition
| Items paid for in advance of receiving their benefits; classified as assets. |
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Term
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Definition
| Ratio of a company’s net income to its net sales; the percent of income in each dollar of revenue; also called net profit margin. |
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Term
| Straight-line depreciation method |
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Definition
| Method that allocated an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life. |
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Term
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Definition
| Accounts used to record revenues, expenses, and withdrawals (dividends for a corporation); they are closed at the end of each period; also called nominal accounts. |
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Term
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Definition
| Assumption that an organization’s activities can be divided into specific time periods such as months, quarters, or years. |
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Term
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Definition
| Balance sheet that broadly groups assets; liabilities, and equity accounts. |
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Term
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Definition
| Liability created when customers pay in advance for products or services; earned when the products or services; earned when the products or services are later delivered. |
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Term
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Definition
| Analyses and other informal reports prepared by accountants and managers when organizing information for formal reports and financial systems. |
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Term
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Definition
| Spreadsheet used to draft an unadjusted trial balance, adjusting entries, adjusted trail balance, and financial statements. |
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Term
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Definition
| Record within an accounting system in which increase and decreases are entered and stored in a specific asset, liability, equity, revenue, or expense. |
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Term
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Definition
| Difference between total debits and total credits (including the beginning balance) for an account. |
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Term
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Definition
| List of accounts used by a company; includes an identification number for each account. |
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Term
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Definition
| Journal entry that affects at least three accounts. |
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Term
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Definition
| Recorded on the right side; an entry that decrease asset and expense accounts, and increases liability, revenue, and most equity accounts; abbreviated Cr. |
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Term
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Definition
| Individuals or organizations entitled to receive payments. |
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Term
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Definition
| Individuals or organizations that owe money. |
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Term
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Definition
| Ratio of total liabilities to total assets; used to reflect risk associated with a company’s records. |
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Term
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Definition
| Accounting system in which each transaction affects at lest two accounts and has at least one debit and one credit. |
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Term
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Definition
| All-purpose journal for recording the debits and credits of transactions and events. |
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Term
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Definition
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Term
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Definition
| Record in which transactions are entered before they are posted ledger accounts; also called book of original entry. |
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Term
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Definition
| Process of recording transactions in a journal. |
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Term
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Definition
| Record containing all accounts (with amounts) for a business; also called general ledger. |
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Term
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Definition
| Process of transferring journal entry information to the ledger; computerized systems automate this process. |
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Term
| Posting reference (PR) columns |
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Definition
| A column in journals in which individual ledger account numbers are entered when entries are posted to those ledger accounts. |
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Term
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Definition
| Tool used to show the effects of transactions and events on individual accounts. |
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Term
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Definition
| List of accounts and their balance at a point in time; total debit balances equal total credit balances. |
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Term
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Definition
| Liability created when customers pay in advance for products or services; earned when the products or services; earned when the products or services are later delivered. |
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Term
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Definition
| Information and measurement system that identifies, records, and communicates relevant information about a company’s business activities. |
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Term
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Definition
| Equality involving a company’s assets, liabilities, and equity: Assets = Liability + Equity; also called the balance sheet equation. |
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Term
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Definition
| Resources a business owns or controls that are expected to provide current and future benefits to the business. |
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Term
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Definition
| Someone who analyzes and reports for an organization’s accounting system, its records, and its reports using various tests. |
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Term
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Definition
| Financial statement that lists types and dollar amounts of assets, liabilities, and equity at a specific date. |
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Term
| Recordkeeping or Bookkeeping |
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Definition
| Part of accounting that involves recording transactions and events, either manually or electronically; also called bookkeeping. |
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Term
| Business entity assumption |
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Definition
| Principle that requires a business to be accounted for separately from its owner(s) and from any other equity. |
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Term
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Definition
| Corporation’s basic ownership share; also generically called capital stock. |
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Term
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Definition
| Total amount of cash and other assets received from stockholders in exchange for stock; also called paid-in capital. |
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Term
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Definition
| Business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders. |
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Term
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Definition
| Accounting principle that prescribes financial statement information to be based on actual costs incurred in business transactions. |
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Term
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Definition
| Corporation’s distributions of assets to its owners. |
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Term
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Definition
| Owner’s claim on the assets of a business; equals the residual interest in an entity’s assets after deducting liabilities; also called net assets. |
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Term
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Definition
| Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest. |
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Term
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Definition
| Happenings that both affect an organization’s financial position and can be reliably measured. |
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Term
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Definition
| Outflows or using up of assets as part of operations of a business to generate sales. |
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Term
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Definition
| Exchanges of economic value between one entity and another entity. |
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Term
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Definition
| Persons using accounting information how are not directly involved in running the organization. |
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Term
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Definition
| Area of accounting mainly aimed at serving external users. |
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Term
| Financial Accounting Standards Board (FASB) |
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Definition
| Independent group of fulltime members responsible for setting accounting rules. |
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Term
| Full disclosure principle |
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Definition
| Principle that prescribes financial statements (including notes) to report all relevant information about an entity’s operations and financial condition. |
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Term
| Generally Accepted Accounting Principles (GAAP) |
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Definition
| Rules that specify acceptable auditing practices. |
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Term
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Definition
| Principle that prescribes financial statements to reflect the assumption that the business will continue operating. |
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Term
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Definition
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Term
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Definition
| Financial statement that subtracts expense from revenues to yield a net income or loss over a specified period of time; also includes any gains or losses. |
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Term
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Definition
| Activities within an organization that can affect the accounting equation. |
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Term
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Definition
| Persons using accounting information who are directly involved in managing the organization. |
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Term
| International Accounting Standards Board (IASB) |
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Definition
| Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS). |
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Term
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Definition
| Creditors’ claims on an organization’s assets; involves a probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events. |
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Term
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Definition
| Area of accounting mainly aimed at serving the decisions-making needs of internal users; also called management accounting. |
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Term
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Definition
| Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses. |
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Term
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Definition
| Principle that assumes transactions and events can be expressed in money units. |
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Term
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Definition
| Amount earned after subtracting all expenses necessary for and matched sales for a period; also called income, profit, or earnings. |
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Term
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Definition
| Excess of expenses over revenues for a period. |
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Term
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Definition
| Unincorporated association of two or more persons to pursue a business for profit as co-owners. |
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Term
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Definition
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Term
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Definition
| Cumulative income less cumulative losses and dividends. |
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Term
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Definition
| Monies received from an investment; often in percent form. |
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Term
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Definition
| See return on total assets. |
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Term
| Revenue recognition principle |
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Definition
| The principle prescribing that revenue is recognized when earned. |
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Term
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Definition
| Gross increase in equity from a company’s business activities that earn income; also called income. |
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Term
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Definition
| Uncertainty about an expected return. |
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Term
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Definition
| Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws. |
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Term
| Securities and Exchange Commission (SEC) |
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Definition
| Federal agency Congress has charged to set reporting rules for organizations that sell ownership shares to the public. |
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Term
| Shareholders or Stockholders |
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Definition
| Owners of a corporation; also called stockholders. |
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Term
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Definition
| Equity of a corporation divided into ownership units; also called stock. |
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Term
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Definition
| Business owned by one person that is not organized as a corporation; also called proprietorship. |
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Term
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Definition
| A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing. |
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Term
| Statement of retained earnings |
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Definition
| Report of changes in retained earnings over a period; adjusted for increases (net income), for decreases (dividends and net loss), and for any prior period adjustment. |
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Term
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Definition
| Assumption that an organization’s activities can be divided into specific time periods such as months, quarters, or years. |
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