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

Amortization-gradual reduction of amounts in an account over time, either assets or liabilities

Asset-property with a cash value that is owned by a business or individual

Audit Trail-a record of every transaction, when it was done, by whom and where, used by auditors when validating the financial statement

Auditors-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

Budgeting-the process of assigning forecasted income and expenses to accounts, which amounts will be compared to actual income and expense for analysis of variances

Capital Stock-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”

Capital Surplus-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

Capitalized Expense-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

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

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”

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.

Departmental Accounting-separating operating divisions into their own sub entities on the income statement, showing individual income, expenses, and net profit by entity

Depreciation-recognizing the decrease in the value of an asset due to age and use

Dividends-amounts paid to shareholders out of current or retained earnings

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

Goodwill-an intangible asset reflecting the value of an entity in excess of its tangible assets

Income Statement-a summary of income and expenses

Inventory-merchandise purchased for resale at a profit

Inventory Valuation-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

Invoice-the original billing from the seller to the buyer, outlining what was purchased and the terms of sale, payment, 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

Master Account-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

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; 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

Posting-the process of entering then permanently saving or “archiving” accounting data

Profit-see “net income”

Profit/Loss Statement-see “income statement”

Reconciliation-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.

Retained Earnings-the amount of net profit retained and not paid out to 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.

Subsidiary Accounts-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”

Supplies-assets purchased to be consumed by the entity

Treasury Stock-shares purchased by the entity from shareholders, reducing shareholder equity

Write-down/Write-off-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