Accounting Equation - The Accounting Equation is Assets = Liabilities + Equity. With accurate financial records, the equation balances.
Accounting - Accounting keeps track of the financial records of a business.
In addition to recording financial transactions, it involves reporting,
analyzing and summarizing information.
Accounts
Payable - Accounts
Payable are liabilities of a business and represent money owed to others.
Accounts
Receivable - Assets of a
business and represent money owed to a business by others.
Accrual
Accounting - Records
financial transactions when they occur rather than when cash changes hands. For
example, when goods are received without payment, an Accounts Payable is
recorded.
Accruals - Accruals acknowledge revenue when it is earned and expenses
when they are incurred even though a cash transaction may not be involved.
Amortization - Reduces debts through equal payments that include interest.
Asset - Items of value that are owned.
Audit Trail - Allow financial transactions to be traced to their source.
Auditors - Examine financial accounts and records to evaluate their
accuracy and the financial condition of the entity.
Balance Sheet - Provides a snapshot of a business' assets, liabilities, and
equity on a given date.
Bookkeeping - Recording of financial transactions in an accounting system.
Budgeting - Budgeting involves maintaining a financial plan to control
cash flow.
Capital Stock - Total amount of common and preferred stock issued by a
company.
Capital Surplus - The amount in excess of par value for shares of common stock.
Capitalized
Expense - Accumulated
expenses that are expensed over time.
Cash Flow - The difference in money flowing in and out. A negative flow
indicates more money going out than coming in. A positive flow shows more money
coming in than going out.
Cash-Basis
Accounting - Records when
cash is received through revenues and disbursed for expenses.
Chart of Accounts - An organization's list of accounts used to record financial
transactions.
Closing the
Books/Year End Closing - Closing the
Books occurs at the end of the annual period and allows for a start with a
clean book at the beginning of the next year.
Cost Accounting - Used internally to determine the cost of operations and to
establish a budget to increase profitability.
Credit - Entered in the right column of accounts. Liability, equity and
revenue increase on the credit side.
Debit - Entered in the left column of accounts. Assets and expenses
increase on the debit side.
Departmental
Accounting - Shows
individual departments' income, expenses and net profit.
Depreciation - The decrease in an asset's value over time.
Dividends - Profits returned to the shareholders of a corporation.
Double-Entry
Bookkeeping - Requires
entries of debits and credits for each financial transaction.
Equity - Represents the value of company ownership.
Financial
Accounting - The
accounting branch that prepares financial reporting primarily for external
users.
Financial
Statement - Financial
Statements detail the financial activities of a business.
Fixed Asset - Used for a long period of time, e.g. - equipment or buildings.
General Ledger - Where debit and credit transactions are recorded.
Goodwill - Intangible asset a business enjoys like its reputation or
brand popularity.
Income
Statement - A Financial
Statement documents the difference in revenue and expenses resulting in income.
Inventory
Valuation - A valuation
method modified for use in real estate and business appraisals.
Inventory - Inventory consists of raw materials, work in progress, and
finished goods.
Invoice - An Invoice shows the amount of money owed for goods or
services received.
In The Black - Makes reference to a profit on the books; opposite of “in the
red.” Black Friday sales are known for the profit retailers are adding to their
books.
In The Red - Makes reference to a loss on the books; opposite of “in the
black.” In the days of handwritten accounting, ledger entries written in black
meant there was a profit, but those in red meant there was a loss.
Job Costing - Job Costing tracks costs of a particular job against its
revenues.
Journal - The first place financial transactions are entered. They are
entered chronologically.
Liability - Liabilities are the obligations of an entity, usually
financial in nature.
Liquid Asset - Consist of cash and other assets that can be easily converted
to cash.
Loan - A monetary advance from a lender to a borrower.
Master Account - A Master Account has subsidiary accounts. Accounts Receivable
could be a master account for various individual receivable accounts.
Net Income - Net Income equals revenue minus expenses, taxes, depreciation
and interest.
Non-Cash
Expense - Does not
require cash outlay, e.g. - depreciation.
Non-operating
Income - Income not
generated from the business. An example might be the sale of unused equipment.
Note - A Note is a document promising to repay a debt.
Operating
Income - Determined by
subtracting operating expenses from operating revenue. Interest and income tax
expenses are not included.
Other Income - Non-recurring income, e.g. - interest.
Payroll - An account listing employees and any wages and salaries due
them.
Posting - Refers to the recording of ledger entries.
Profit - Profit is revenue minus expenses. Reductions for taxes,
interest, and depreciation are included.
Profit/Loss
Statement - A financial report issued by a company on a regular basis that
discloses earnings, expenses and net profit for a given time period.
Reconciliation
- The act of proving an account balances; debits and credits
equal. An example of reconciling an account is to verify that the bank
statement matches the checkbook balance, making allowances for outstanding
checks and deposits.
Retained
Earnings - Money left after all the bills have been paid and all the
shareholder dividends have been distributed; often reinvested in the business.
Revenue - The actual
amount of money a company brings in during a particular time period; gross
income.
Shareholder
Equity - A company’s total assets less its total liabilities; owner’s
equity; net worth. Shareholder equity comes from the start-up capital of the
business plus retained earnings amassed over time.
Single-Entry
Bookkeeping - An accounting process that uses on one entry, instead of debit
and credit entries. Small businesses using cash accounting system benefit from
the ease of this system, which is much like keeping a checkbook.
Statement of
Account - A written document that shows all charges and payments; accounts
receivable statement; accounts payable statement. Generally, a monthly accounts
receivable statement is sent to a charge customer; and reconciled by an
accounts payable clerk for payment.
Subsidiary
Accounts - Accounts that are under a control account; they must equal the
main account balance. Examples of subsidiary accounts may be “Office Supplies,”
or “Cleaning Supplies,” under the control account called “Supplies.”
Supplies - Consumable
materials used in business and replenished as needed. Supplies are not
inventory for sale; rather they are used to carry out business activities.
Treasury Stock
- Shares a company retains or buys back once offered to the public
for purchase.
Write-down/Write-off
- An accounting transaction that reduces the value of an asset.