Accounting Glossary Flashcards
A device for recording the changes (increases or decreases) in the fundamental accounting elements
Account
An unwritten promise to pay creditors for property, such as merch, supplies or equipment, purchased on credit, or for services received on credit
Account Payable
An unwritten promise by a customer to pay, at a later date, for goods sold or services rendered
Account Receivable
Measures how many times per year receivables are collected. Calculation net credit sales divided by Average Accounts Receivable.
(Beginning Accounts Receivable - Ending Accounts Receivable) divided by 2
Accounts Receivable Turnover
Recording in each fiscal period applicable expenses, whether paid or not, and income earned
Accrual Accounting
An expense incurred in operating a business during an accounting period, but not yet paid
Accrued Expense
Income actually earned during an accounting period but which will not be received until a future period
Accrued Income
Quick assets
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Current liabilities
Acid Test Ratio / Quick Ratio
Measures how efficiently a firm is utilizing its assets
Activity Analysis
Entries made at the conclusion of a fiscal period to ring accounts up to date
Adjusting Entries
Measures the average time required to collect receivables
Age of Accounts Receivable
360 days
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Accounts Receivable Turnover
Calculation
Allowance for Bad Debts
A contra account utilized to accumulate totals against accounts receivable
Allowance for Doubtful Accounts
Determining the fundamental significance of business transactions so that financial information may be properly processed
Analyzing
Accounts receivable that is uncollectible
Debts Expense / Uncollectible Accounts Expense / Loss from Uncollectible Accounts
A check drawn by one bank on another bank in which it has funds on deposit
Bank Draft
The process by which the depositor attempts to reconcile the bank statement balance with the checkbook balance
Bank Statement Reconciliation
An itemized listing prepared by the bank of additions to the subtractions from a depositor’s account
Bank Statement
A method of computing interest based on the assumption that there are 360 days in a year
Banker’s Method / 360 Day Method
One who is involved in the process of recording financial information in a prescribed manner
Bookkeeper / Information Processor
The recording of financial information in a prescribed manner
Bookkeeping
The cost of a fixed asset less its accumulated depreciation
Book Value / Undepreciated Cost
A formal written statement, which may be based upon adjusted historical data, of management’s plans for the future expressed in financial terms
Budget
A check that has been paid by the bank and returned to the drawer for record keeping
Cancelled Check
The amount by which the total assets exceed the total liabilities of a business; An owner’s financial interest in a business
Capital
Coins, currency (paper money), checks, credit card receipts and money orders received from others, as well as money deposited in the bank
Cash
An accounting practice in which revenue is not recognized in the accounting records until received and in which expenses are not recognized until paid
Cash Basis Accounting
Discounts from quoted prices as an inducement for prompt payment of invoices
Cash Discounts
Money and money substitutes paid
Cash Payments / Cash Disbursements
A special ledger account that is used to keep track of unexplained shortages or overages of cash
Cash Short and Over
A check drawn by a bank on its own funds and signed by an officer of the bank
Cashiers Check
A check that carries the guarantee of the bank that sufficient funds are available to pay the check when it is presented
Certified Check
An individual possessing a college education, having practical experience in accounting and who has passed a comprehensive state examination in order to be certified to practice public accounting in that state
Certified Public Account (C.P.A)
A list of all the account titles and the account numbers assigned to them
Chart of Accounts
A piece of commercial paper drawn on funds in a bank account and payable on demand
Check
A form on which information is recorded by the drawer of a check concerning the check drawn
A source document
Check Stub
In accounting, to record in order of time.
Chronological
A book of original entry which combines into one journal, the features of the two column general journal and a special journal
Combination Journal
An accounting entry that involves more than two accounts
Compound Journal Entry
An account designed to accumulate totals to offset a related account
Contra Account
The abbreviation for credit
CR
A condition that occurs when the total of the credits in an account is larger than the total of the debits in that account
Credit Balance
A source document that grants credit to a buyer for purchase return of purchase allowance
Credit Memorandum
A business or individual to whom a debit is owed
Creditor
A process of entering the journal page number in the ledger and the ledger account number in the journal
Cross Referencing
Cash or other assets that will be converted into cash or consumed within one year
Current Assets
Current assets
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Current Liabilities
Current Asset Ratio
Debts of a business that are general paid within one year
Current Liabilities
A condition that occurs when the total of the debits in an account is larger than the total of the credits in that account
Debit Balance
The business or individual who owes a debt
Debtor
Deposits that have been made and added to depositor’s checkbook, but which have not yet been listed on the bank statement
Deposits in Transit
A bank form which lists those cash items (currency and coin) and individual checks to be deposited
Deposit Ticket / Deposit Slip
The loss in value of a fixed asset due to wear and tear and the passage of time; or, a method of matching the cost of a fixed asset against the revenues that the fixed asset will help produce during its useful life
Depreciation
That portion of the original cost of a fixed asset that is assigned as an expense to the reporting period expected to benefit from its use
Depreciation Expense
A payment
Disbursement
A specific number of days during which a discount is available if the account is paid
Discount Period
A check not paid by the bank when properly presented
Dishonored Check
A process of recording equal debits and credits for a single business transaction
Double Entry Accounting / Double Entry Bookkeeping
A separate owner’s equity account in which withdrawals of cash or other assets by the owner for personal use are recorded
Drawing Account / Owner Withdrawal
One who is under the control and direction of an employer with regard to the performance of employment
Employee
The signature of the payee or other holder placed on the back of a check or other negotiable instrument
Endorsement (Indorsement)
A person or company whose name is written on the back of a check
Endorser
A decrease in assets, other than withdrawals by the owner, which result from efforts to produce revenues
Expense
The principle sum the maker of a note promises to pay
Face of Note
The amount that an employer must withhold from an employee’s pay for income tax purposes
Federal Income Tax Withholding
A federal act imposed upon each employer for the purpose of financing the administration costs of the federal and the state unemployment compensation programs
Federal Unemployment Tax Act
The process of communicating the results achieved during an accounting period to others
Final Processing / Reporting
A period of time covered by an income statement
Fiscal Period
Property of a relatively permanent nature used in the operation of a business and not intended for resale
Fixed Assets / Long Term Assets
Property of a relatively permanent nature used in the operation of a business and not intended for resale
Fixed Liabilities / Long Term Liabilities
A total, written in small pencil figures, under the last entry in a column of an account
Footing / Pencil Footing
FUTA
Federal Unemployment Tax Act
Net sales minus the cost of goods sold
Gross Profit / Gross Margin
Gross profit divided by net sales
Gross Profit Percentage
A condition in which the total of the debits and the total of the credits are equal in an account
In Balance
An inflow of assets as a result of selling a product or providing a service
Income / Revenue
A formal financial statement which presents the income, expenses, and resulting net profit or net loss for a given period
Income Statement / Profit and Loss Statement / Statement of Operations / Operating Statement
A tax levied on the earnings of individuals and businesses by federal, state, and local governments
Income Tax
Any person who agrees to perform a service for a fee and who is not subject to the control of those for whom the service is performed
Independent Contractor
Those assets that cannot be touched or grasped (examples: patents, copyrights, goodwill)
Intangible Assets
Money paid for the use of money
Interest
Explaining the significant events or developments that occur, usually taking the form of analysis and comparisons
Interpreting
The number of times the average inventory has been sold or used up (turn over) during a period
Calculation: 365 / Cost of Goods Sold for Period / Average Inventory
Note: Average Inventory = (Beginning inventory + Ending Inventory) divided by 2
Inventory Turnover
A source document showing quantity, description, prices of items, total amount of purchase and the terms of payment
Inventory
Measures the ability of the firm to meet its current obligations
Liquidity Analysis
An individual who promises to pay on a promissory note; an individual who signs a promissory note
Maker
The date on which payment is due on a promissory note
Maturity Date
A long-term liability; a written promise that pledges real property as security for payment of a debt
Mortgage Payable
NSF
Not Sufficient Funds
The difference between gross profit and expenses when gross profit are larger
Net Income / Net Profit
The difference between gross profit and expenses when expenses are larger
Net Loss
Gross pay less payroll deductions; employees take home pay
Net Pay / Net Earnings
A written promise to pay a creditor a certain amount in the future
Note Payable
A written promise of a customer to pay the business a sum of money at a future date
Note Receivable
Expenses incurred in the normal operation of a business
Operating Expenses / Overhead
The amount originally paid for a depreciable asset
Original Cost Basis
Expenses incurred that is not the direct result of regular trading activities of a business
Other Expenses
Income received that is not the direct result of regular trading activities of a business
Other Income
Checks that have been drawn and subtracted from the depositor’s checkbook, but which have not yet been presented to the bank for payment
Outstanding Checks
The issuance of a check without sufficient funds in the account when it is presented for payment
Overdraft
A work paper prepared after all temporary owner’s equity accounts have been closed and all permanent accounts have been balanced and ruled, proving the equality of the debits and credits
Post Closing Trail Balance
A check dated subsequent to (following) its date of issuance
Postdated Check
Items that are considered to be assets when acquired, but which will become expenses when consumed or expired
Prepaid Expenses
A face value of a promissory note upon which interest is computed
Principal
Net income
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Net sales
Profit Margin
Profitability Analysis
Provides evidence concerning the earnings potential of a company and how effectively the firm is being managed
Promissory Note
A written promise made by a person or business to pay a certain sum of money to another person or business at a specific time in the future
Proving Cash
The process of determining whether the amount of cash, both on hand and in the bank, is the same as that which is indicated in the accounting records
Purchase Invoice
A source document prepared by the seller listing the items shipped, their cost and the method of shipment (from the buyer’s viewpoint)
Purchase Order
A written order by a buyer for merchandise or other property specified in the purchase requisition
Purchase Requisition
A form used to request the responsible person or department to purchase merchandise or other property
Purchases
A temporary owner’s equity account used to record purchases of merchandise for resale
Purchases Returns and Allowances
A temporary owner’s equity contra account utilized to record the return of merchandise to the manufacturer or supplier as the result of material defects in workmanship and / or inferior product quality
Quarterly
A three month period
Quick Assets
Cash, marketable securities, accounts and notes receivable
Rate
The annual percentage rate used to compute interest
Recording / Data Entry
The committing of a business transaction and the events surrounding such into writing
Retail Sales Tax
A tax imposed on tangible personal property sold at retail
Salary
Generally considered to be compensation for managerial or admin services, expressed in terms of a month or year
A temporary owner’s equity account used to record the earning of revenue
Sales
A temporary owner’s equity contra account used to record discount given to customers as an incentive for prompt payment
Sales Discount
Sales Invoice
A source document prepared by the seller that lists the items shipped, their cost and the method of shipment (from the seller’s viewpoint)
The first record of a business transaction, such as check stubs, receipts, sales invoices, purchase invoices, cash register tapes, etc etc
Source Document / Business Paper
A special journal designed to accumulate data about only one kind of business transaction
Special Journal
A report sent to each customer, usually at the end of the month, which indicates the status of their account
Statement of Account
A formal financial statement illustrating the assets, liabilities, and owner’s equity of a business as of a specific date
Statement of Financial Condition / Statement of Financial Position
A formal financial statement which summarizes all of the changes in owner’s equity during a specified period of time
Statement of Owner’s Equity / Statement of Net Worth
An order by a depositor requesting a bank not to pay on a check previously issued
Stop Payment Order
Bringing accounting data together in a way that will further enhance its usefulness, usually by means of reports and statements
Summarizing
A type of asset that will be consumed as it is used
Supplies
SUTA
State Unemployment Tax Act
The amount of pay after deductions (income taxes, FJCA taxes, etc.) have been subtracted
Take Home Pay / Net Pay
Tangible Assets
Those assets that can be appraised by value or seen or touched
Temporary Owner’s Equity Accounts
Accounts utilized to accumulate income, expenses and owner’s withdrawals for one accounting period only
Time / Term of Note
The period of time from the date of the note to the maturity date
Transaction Analysis
The effect of transactions on the accounting elements
Transaction
Any activity of a business enterprise that involves the exchange of values
Transposition Error
An amount written with the digits in incorrect order
Useful Life
The estimated determinable life of a fixed asset
W-2 Form - Wage and Tax Statement
A report furnished by the employer for each employee indicating gross earnings and deductions for income and FICA taxes
W-4 Form
Employees’ Withholding Allowance Certificate
Wage
A form of compensation usually for skilled and unskilled labor, expressed in terms of hours, weeks, or pieces completed
The sorting of the many business transactions in an order and systematic manner
Classifying
