Accounting Terminology Flashcards
account
a detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period
accounting
the information system that measures business activities, processes the information into reports, and communicates the results to decision-makers
accounting equation
the basic tool of accounting, measuring the resources of the business (what the business owns or has control of) and the claims to those resources (what the business owes to creditors and to the owners).
assets = liabities + equity
accounting cycle
the process by which companies produce their financial statements for a specific period
accounting light, accounting on a cash basis
an accounting method that records revenues only when cash is received and expenses only when cash is paid
accounting record
the written transaction record of the accounts and amounts that will be booked into the accounting system
accounting system
the software used in a company for doing the bookkeeping, the programs used - for example, SAP, BMD, easy, Schweighofer, etc.
accounts payable
A short-term liability that will be paid in the future. Also called trade payables. An account payable is a
liability backed by the general reputation and credit standing of the debtor, results from a purchase of goods
or services on open account.
Accounts Payable Subsidiary
Ledger
A subsidiary ledger that includes an accounts payable account for each vendor that contains detailed
information such as the amount purchased, paid, and owed.
Accounts Receivable
Subsidiary Ledger
A subsidiary ledger that includes an accounts receivable account for each customer that contains detailed
information such as the amount sold, received, and owed.
Accounts Receivable
The right to receive cash in the future from customers for goods sold or for services performed.
Accrual Basis Accounting
Accounting method that records revenues when earned and expenses when incurred.
Accrued Expense
An expense that the business has incurred but has not yet paid.
Accrued Liability
A liability for which the business knows the amount owed but the bill has not been paid.
Accrued Revenue
A revenue that has been earned but for which the cash has not yet been collected.
Accumulated Depreciation
The sum of all the depreciation expense recorded to date for a depreciable asset.
Adjusted Trial Balance
A list of all the accounts with their adjusted balances. These balances are directly taken into the financial
statements
Adjusting Entry
An entry made at the end of the accounting period that is used to record revenues to the period in which they
are earned and expenses to the period in which they occur
Amortization
The process by which businesses spread the allocation of an intangible asset’s cost over its useful life.
Annual Report
Provides information about a company’s financial condition.
Asset Exchange
The exchange of one asset against another one - for example a purchase of a long term asset paid via Bank
transfer, thus increasing one asset and decreasing another one.
Assets
Economic resources that are expected to benefit the business in the future. Something the business owns or
has control of.
Audit
An examination of a company’s financial statements and records
Balance Sheet
Report on the assets, liabilities, and stockholders’ equity of the business as of a specific date.
Bank Statement
A document from the bank that reports the activity in the customer’s account. It shows the bank account’s
beginning and ending balances and lists the month’s cash transactions conducted through the bank account.
Bookkeeping
The recording of all business transactions that take place in a company into a bookkeeping system
(accounting system).
Breakeven Point
The sales level at which operating income is zero. Total revenues equal total costs.
Business Transaction
An event that affects the financial position of the business and can be measured with faithful representation
Cash Basis Accounting
Accounting method that records revenues only when cash is received and expenses only when cash is paid.
Cash Equivalent
A highly liquid investment that can be converted into cash in three months or less.
Cash Flows
Cash receipts and cash payments of a business
Cash Flow Statement
The financial report analyzing the changes in one asset - the cash - of a company. It shows in a special
format the cash flow from operating activities, financing activities and investing activities.
Chart of Accounts
A list of a company’s accounts with their account numbers and names.
Compound Journal Entry
A journal entry that is characterized by having multiple debits and/or multiple credits.
Consolidated Statements
Financial statements that combine the balance sheets, income statements, and statements of cash flow of
the parent company with those of its controlling interest affiliates.
Consolidation Accounting
The way to combine the financial statements of two or more companies that have the same owners.
Contra Account
An account that is paired with, and is listed immediately after, its related account in the chart of accounts
and associated financial statement and whose normal balance is the opposite of the normal balance of the
related account.
Cost of Goods Sold (COGS)
The cost of the merchandise inventory that the business has sold to customers. It can include more than just
the material expenses for these items, for example also personnel expenses or warehousing.
Cost Principle
A principle that states that acquired assets and services should be recorded at their actual cost.
Credit
The right side of a T-account.
Creditor
Any person or business to whom a business owes money.
Credit Terms
The payment terms of purchase or sale as stated on the invoice
Current Asset
An asset that is expected to be converted to cash, sold, or used up during the next 12 months or within the
business’s normal operating cycle if the cycle is longer than a year
Current Liability
A liability that must be paid with cash or with goods and services within one year or within the entity’s
operating cycle if the cycle is longer than a year.
Customer
The party to a business transaction who receives (buys) goods or services from the seller
Debit
The left side of a T-account.
Debtor
The party to a credit transaction who takes on an obligation/payable
Deferred Expense
An asset created when a business makes advance payments of future expenses
Depletion
The process by which businesses spread the allocation of a natural resource’s cost over its usage.
Depreciation
The process by which businesses spread the allocation of a plant asset’s cost over its useful life
Discount
A discount is granted by a seller to customers according to the payment terms: the right to deduct a certain
amount from a bill if payment is made earlier than when the payment is due, for example: payment 30 days
net, 7 days 2% (discount)
Dividend
A distribution of a corporation’s earnings to stockholders.
Double-Entry Accounting
A system of accounting in which every transaction affects at least two accounts.
Entrepreneurial Code
The law that covers all topics concerning entrepreneurs, as far as accounting is concerned, the third book of
this law has to be obeyed if accountability is given (§ 189 to § 283 - for corporations and companies having
more than 700.000 Euros of revenues.
Equity
The owners’ claims to the assets of the business.
Expenses
The costs of selling goods or services. An expense reduces the result of a business year as the purchased
good or service is used up right away in the business period.
External Auditor
An outside accountant, completely independent of the business, who evaluates the controls to ensure that
the financial statements are presented fairly in accordance with GAAP.
Financial Accounting
The field of accounting that focuses on providing information for external decision makers
