process of identifying, measuring, and reporting financial information of an entity
assets = liabilities + equity
money owed to creditors, vendors, etc.
money owed to a business, i.e. credit sales
a method in which income is recorded when it is earned and expenses are recorded when they are incurred, all independent of cash flow
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 or liabilities
property with a cash value that is owned by a business or individual
a record of every transaction, when it was done, by whom and where, used by auditors when validating the financial statement
third party accountants who review an entity’s financial statements for accuracy and provide a statement to that effect
summary of a company’s financial status, including assets, liabilities, and equity
recording financial information
the process of assigning forecasted income and expenses to accounts, which amounts will be compared to actual income and expense for analysis of variances
found in the equity portion of the balance sheet describing the 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 the amount shareholders paid that is greater or lesser than the “capital stock” amount
expenses that are accumulated, not expensed as incurred, to be amortized over a period of time; i.e. the development cost of a new product
Chart of Accounts
a listing of a company’s accounts and their corresponding numbers
a method in which income and expenses are recorded when they are paid.
a summary of cash received and disbursed showing the beginning and ending amounts
Closing the Books/Year End Closing
the process of reversing the income and expense for a fiscal or calendar year and netting the amount into “retained earnings”
a type of accounting that focuses on recording, defining, and reporting costs associated with specific operating functions
an account entry with a negative value for assets, and positive value for liabilities and equity.
an account entry with a positive value for assets, and negative value for liabilities and equity.
separating operating divisions into their own sub entities on the income statement, showing individual income, expenses, and net profit by entity
recognizing the decrease in the value of an asset due to age and use
amounts paid to shareholders out of current or retained earnings
system of accounting in which every transaction has a corresponding positive and negative entry (debits and credits)
money owed to the owner or owners of a company, also known as “owner’s equity”
accounting focused on reporting an entity’s activities to an external party; ie: shareholders
a record containing the balance sheet and the income statement
long-term tangible property; building, land, computers, etc.
a record of all financial transactions within an entity
an intangible asset reflecting the value of an entity in excess of its tangible assets
a summary of income and expenses
merchandise purchased for resale at a profit
the method to set the book value of unsold inventory: i.e. “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 purchased and the terms of sale, payment, etc.
system of tracking costs associated with a job or project (labor, equipment, etc) and comparing with forecasted costs
a record where transactions are recorded, also known as an “account”
money owed to creditors, vendors, etc
cash or other property that can be easily converted to cash
money borrowed from a lender and usually repaid with interest
an account on the general ledger that subtotals the “subsidiary accounts” assigned to it; i.e. Cash might be the master account for a list of depository accounts at banks
money remaining after all expenses and taxes have been paid
recognizing the decrease in the value of an asset; i.e. depreciation and amortization
income generated from non-recurring transactions; ie: sale of an old building
a written agreement to repay borrowed money; sometimes used in place of “loan”
Income generated from regular business operations
income generated from other than regular business operations, i.e. interest, rents, etc.
a list of employees and their wages
the process of entering then permanently saving or “archiving” accounting data
see “net income”
see “income statement”
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 shareholders over the life of the business
total income before expenses.
the capital and retained earnings in an entity attributed to the shareholders
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 under “master accounts;” i.e. “Cash-ABC Bank” might be one of several subsidiary accounts that are subtotaled under “Cash”
assets purchased to be consumed by the entity
shares purchased by the entity from shareholders, reducing shareholder equity
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