Double entry glossary Flashcards
Account
A record in a double entry bookkeeping system that is kept for each (or each class) of asset, liability, income, expense, capital and drawings.
Accountant
A person who practises accountancy.
Accounting
A set of theories, concepts and techniques by which financial data are processed into information for reporting, planning, controlling and decision making purposes, or the process of recording, classifying, reporting and interpreting the financial data of an organisation.
Accounting equation
An expression of the equivalence, in total, of assets = liabilities + owner’s equity.
Accounting period
The time period, typically one year, to which financial statements are related.
Accounts payable
Amounts owed to suppliers for the purchase of goods and services: commonly called creditors.
Accounts receivable
Amounts that customers owe an organisation for goods and services supplied: commonly called debtors.
Accruals
Expenses which have been consumed or enjoyed but which have not been paid for at the accounting date. For example, telephone calls made but not yet paid for.
Accruals concept
Concept whereby revenue and costs are matched to the period to which they relate rather than the period in which they are received or paid. Also called the ‘matching’ concept.
Accumulation depreciation
The extent to which the original cost of an asset has been charged to the income statement. Cost less accumulated depreciation = net book value.
Assets
The economic resources of an enterprise that are expected to be used in future time periods and that can be expressed in money terms.
Auditing
The independent examination of, and expression of opinion on, the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.
Authorised share capital
The amount of capital stated in the Memorandum of Association. The company cannot issue more than the authorised capital but the amount can be increased providing the prescribed procedures are followed.
Bad debuts
Debts known to be irrecoverable and therefore treated as losses by inclusion in the income statement as an expense.
Bank reconciliation
A statement which explains the difference in the balance shown by a cash book from that shown by a bank statement. The differences are normally caused by differences in the timing of issuing cheques and their presentation to the bank and similar timing differences.
Bonus issue
An issue of new shares to existing shareholders. No payment is made for the shares.
Bookkeeping
The art of recording an enterprise’s transactions in the books of account of the enterprise. Bookkeeping is ideally carried out using the formal system known as double entry bookkeeping.
Book value
The amount at which an asset is carried in the accounting records. The value is usually the original cost less accumulated depreciation. Alternative phrases are net book value and written down value. Book value rarely corresponds to ‘real’ values such as saleable value.
Called-up capital
When shares are issued the sums due may be payable by instalments either at fixed dates or when the directors so determine. A request for payment is known as a call and that part of the share capital which has been paid or requested is known as the called up capital.
Capital
An imprecise term meaning the whole quantity of assets less liabilities owned by a person or business. The capital account of a sole proprietor is equal to the assets less liabilities of the business.
Capital expenditure
Expenditure that provides long term benefits. Most capital expenditure is on fixed assets.
Casting
The accounting term for adding up.
Cheque
A bill of exchange drawn on a bank and payable on demand.
Compensating error
A bookkeeping term for two separate errors whose separate effects are cancelled out. Thus the errors do not give rise to a difference in the trial balance.