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Worsham Accounting

Glossary terms for the accounting comprehensive final

QuestionAnswer
Account a device for recording the changes in the fundamental acounting elements
Account Balance the difference betweeen the total debits and the total credits in an account
Accountant one who is concerned with the desing of the system of records, the preparation of reports based upon the recorded data, and the interpretation of the reports
Accounting a language of business employed to communicate financial information based upon analysing, recording, classification, summarization, reporting, and interpretation of finacial data
Accounting Cycle the process involved in journalizing, posting to the ledger, taking a trial balance, preparing statements, making adjusting and closing entries, and preparing a post-closing trial balance, which is repeated each fiscal period
Accounting Equation Assets = Liabilities + Owner's Equity
Account Payable an unwritten promise to pay creditors for property such as merchandise, supplies or equipment purchased on credit, or for services recieved on credit
Account Receivable an unwritten promise by a customer to pay at a later date for goods sold or services rendered
AccountsReceivable Turnover measures how many times per year receivables are collected
Calculation for Accounts Receivable Turnover net credit sales devided by Average Accounts Receivagble
Accrual Accounting recording in each fiscal period applicable expenses, whether paid or not, and income earned
Accrued Expense an expense incurred in operatinga business during an accounting period but not yet paid
Accrued Income income actually earned during an accounting period but which will not be received until a future period
Acid Test Ratio/Quick Ratio quick assets divided by current liabilities
Activity Anaysis measures how efficiently a firm is utilizing its assets
Adjused Trial Balance a trial balance taken after adjusting entries have been recorded
Adjusting Entries entries made at the conclusion of a fiscal period to bring accounts up to date
Age of Accounts Receivable measures the average time requiered to collect recievables (365 days divided by Accounts receivable Turnover)
Age of Inventory measures the average time required to sell inventory (365 days divided by Inventory Turnover)
Allowance for Doubtful Accounts (allowance for Bad Debts) a contra acount utilized to accumulate totals against accounts receivable
Analyzing detemining the fundamental significance of business transactions to that finacial information may be properly processed
Assets property of monetary value owned by a business
Bad Debts Expense accounts receivable that are uncollectible
Balance Sheet a formal finacial statement illustrating the assets, liabilities, and owner's equity of a business as of a specific date
Bank Draft a check drawn by one bak on another bank in which it has funds on deposit
Bank Statement Reonciliation th eprocess by which the depositer verifies agreement between his chebook balance and the bank statement balance
Bank Statement an itemized listing prepared by the bank of additions to and sbutractions from a depositor's account
Cancelled Check a check that has been paid by the ank and returned to the dawer for recordkeeping
Capital the amount by which the total assets exceed the total liabilities of a business
Cash coins, currency, checks
Cash Discounts discounts from quoted pricesas an inducement for promt payment of invoices
Cash Payments Journal a book of original entry in which only cash disbursements are recorded
Cash Receipts Journal a book of original entries in which only cash receipts are recorded
Cashires Check a check drawn by a bank on its own funds and signed by an officer of the bank
Certified Check a check that carries the quarantee of the bank that sufficient funds are avaliable to pay the check when it is presented
a list of all the acount titles and the account numbers assinged to them
Check a piece of commercial paper drawn on funds in a bank account and payable on demand
Chect stub a form on which information is recorded by the drawer of a check concerning the check drawn
Chronological in accounting, to record in order of time
Classifing the sorting of the many business transactions in a norderly and systematic manner
Closing Entries entries made at the end of each reporting period to transfer the balances of the temporary owner's equity accounts to the permanent ower's equity account
Combination Journal a book of original enry which combines into one journal the features of the two-column general journal and a special journal
Compound Journal Entry an accounting entry that involves more than two accounts
Contra Account an account desgned to accumulate totals to offset a realated account
Credit (Cr)
Credit Balance a condidion that occurs when the total of the credits in an account is larger than the total of he debits in that account
Credit Memorandum a source doucment that granst credit to a buyer for purchase return or purchase allowance
Creditor a business or individual to whom a debt is owed
Cross Referencing a process of entering the journal page number in the ledger and the ledger account number in the journal
Current Assets cash or other assets that will be converted into cash or consumed within one year
Current Asset Ratio current assets divided by current liabiliies
Current Liabilities debts of a business that are gerally paid within one year
Current Ratio Current assets divided by current liabilities
Debit (Dr) the left side of a standard acount
Debit balance 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 Memorandum items the bank deducts from the account balance
Debtor the business or individual who owes debt
Deposits in Transi deposits that have been made and aded to depositor's checkbook, but which have not yet been listed on the bank statement
Deposit Ticket/Slip a bank for m which lists thos cash items and individual checks to be deposited
Deprecation th eloss in value of a fixed asset due to wear and tear and the passage of time
Depreication Expense that protion of the original cost of a fixed asset that is assinged as an expense to the reporting perid expercted to benefit from its use
Disbursement a payment
Discount Period a apecific number of days during which a discount is available if the account is paid
Dishonored Check a check not paid by the bank when prperly presented
Double Entry Accounting a process of recording equal debits and credits for a single business transaction
Drawee a person or concern, usually a bank, that has been ordered to make a payment of a check or draft
Drawer a person (depositor) who sings a check, ordering a payment to be made
Drawing account a separate owner's equity account in which withdrawals of cash or other assets by the owener for personal use are recorded
Employee one who is under the control and direction of an employer with regard to the performance of employment
Endorsement th esignature of the payee or other holder placed on the back of a check or other negotiable instrument
Endorser a person or company whose name is written on the back of a cheak
Expense a drecrease in assets, other than withdrawas by the woner, which result from efforts to produce revenues
Face of Note the principal sum the maker of a note promises to pay
Federal Income Tax Withholding the amount that an employer must witholdfrom an employee's pay for income tax purposes
Federal Insurance Contributions Act a federal act wich requires most employers and emploees to pay taxes to support the Federal Social security program
Federal Unemployment Tax Act a federal act imposed upon each employer for the purpose of financing the administratin costs of the federal and the state unemployment compensation programs
F.I.C.A. Federal Unemployment Tax Act
Genral journal a book of original entry in which business transactions are recorded in chronological order
General Ledger the book of accounts
Gross Earnings/Gross Pay income before any deductions have been made
Gross Profit/Gross Margin net sales minus the cost of goods sold
Gross PRofit Percentage gross profit divided by net sales
IN Balance a condition in which the total of the debits and the total of the credits are equal in an account
Income/Revenue an inflow of assets as a result of selling a prodct or provding a servie
INcome Statement Commmon-Size Statements/Percentage Method express the major items in th eINcome Statemnt as a precent of Net Sales and compare with previous fiscal periods
Income Statement Comparative Forms record the income statement data for two or more Comparable periods of the same form so that the infomration can be readily compared
Income Statement a formal financial statement which presents the income, expenses, and resulting net profit or net loss for a given period
Income Tax a tax levied on the earnings of individuals and businesses by federal, state, and local governments
Independent Contractor any person who agrees to perfomr a service for a fee and who is not subject to the ocntrol of those for whom th e service is perfomred
Information Processor "bookkeeper"
Intangible assets those assets that cannot be touched or grasped
Interest money paid for the use of money
Inerpreting explaining th esignificant events or developments that occur, usually taking the form a analysis and comparisons
Inventory Turnover the number of times the avera inventory has been sold or used up during a period
Invoice a source document showing quantity, description, prices of items, total amount of purchase and the terms of payment
Journalizing the process of recording business transactions in a journal
Ledger a book of accounts
Liabilities any debts that a business owes
Liquidity Analysis
Long-Term Assets Fixed assets
Maker an individual who promises to pay on a promissory not
Maturity date the date on which payment is due on a promissary note
Merchandise goods purchased for resale at a profit
Mortgage Payable a long-term liability; written prmoise that pledges rea property as security for payment of a debt
N.S.F. Not sufficient funds
Net income the difference between gross profit and expenses when gross profit is larger
Net loss the difference between gross profit and expenses when expenses are larger
Net pay gross pay less paroll deductions
Net purchases purchases minus purchse returns and allowances minus purchase discounts
Net sales sales minus sales returns and allowances minus discount
Net worth capital
Not payable a written promise to pay a creditor a certain amount in the future
Note receivable a written prmise of a cusomter to pay the business a sum of mone at a future date
Operateing Expenses expenses in curred in the nomral operation of a business
Operating Staement Income statement
Original cost basis the amount originally paid for a depreciable asset
Other Expenses expenses incureed that are not the direct result of regular trading activities of a business
Other Income income recieved that is not the direct result of reqular trading activities of a business
Outstanding Checks checks that have been drawn and subtracted from the depositor's checkbook but which have not yet been presented to the bank for payment
over draft the issuance of a check without sufficient funds in the account when it is presented for payment
Owner's Equity the amount by which the total assets exceed the total liabilities of a busness
Payee a person or comapny who will receive payment on a promissary note, check, draft or money order
Petty Cash Fund a fund of currency and coin established for the payment of small amounts of money
Petty Cash voucher a form used to reflect payments from the petty cash fund
Post-closing Trial Balance a work paper prepared after all the woner's temporary equity accounts have been closed and all permanent accounts have been baanced and ruled proving the equality of the debits and credits
Postdated Check a check dated subsequent to its dae of issuance
Posting thransferal of data from the journal to the ledger
Prepaid Expenses items that are soncidered to be assets when acquired, but which will become expenses when sonsumed or expired
Pricipal the face value of a promissory note upon which interest is computed
Profit Margin net income divided by net sales
Profitability Analysis provides evidence concerning the earnings potential of a company and how effectively the firm is being managed
Promissory note written order by a buyer for erchandise or other property sepcified in the purshase requisition
Proving the Journal a process wich examines each page of a journal, confirming that the debit entries equal the credit entries on each page
Proving Cash the process of detemining wheterh the amount of cahs, both on hand and in the bank, is the same as the which is indicated in the accounting records
Purchase Invoice a source document prepared by the seller lising the items shipped, their cost and the method of shipment
Purchase Order a written order by a buyer for mercandise or other property specified in the purchase reuisition
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 the buying of merchandise for resale
Purchases Discount a temporary owner's equity conra acount used to record diiscounts taken on inventory purchases; the amount of any disounts granted by suppliers to enourage prompt payment of their invoices
Purchases journal a book of original entry used to record purchases of merchandise on credit only
Purchases Returns and allowances a temporary owner's equity contra account utilized to record the return of merchandise to the manufactuere or supplier as the resuld of material defects in workamanship and/or inferior product quality
Quarterly a three-month period
Quick Assets cash, marketable securities, accounts, and notes receivable
Rate the annual precentage rate used to compute interes
Recording the committing of business transaction and the events surrounding such into wrigin
Resricitve ednorsement an enorsement that limits the use of unds to the purpose stated
Retail Sales Tax a tax imposed on tanigible personal property sold at retail
Salary genrally considered to be compensation formanagerial or admisistrative services, experessed in terms of a month or yhear
Sales a temporary owner's equity account used to record the earning of revenue
Sales discount temporary owner's equit contra account uded to record dicounts given to customers as an incentive for promt payment
Sale Invoice a source document prepared by the seller that lists the itmes shipped thei rcost and the meothod of shipment
a book of original entry used for the recordin of sales of merchandise on credit only
Sales Returns and Alowances a temporary equity conra account used to record credit given to a customer for shortages or damaged goods
Alvage Value extimated value of a fixed asset at the endo fits useful life
Source Document first record of a business transaction
Special Journal a special journal designed to accumulate data about only one kind of business trasaction
Staement of account a report sent to each customer, usually at the end of themonth, which indicates th s
Statement of Financial Condition Balance sheet
Statement of Owner's Equity a formal financial statement which summarizes all of the changes in owner's equity during a specified period of time
Straight Line depriciation method in which the depreiciable cost basis of an asset is apportioned equally over its estimated useful life expressed in terms of months or years
Stop Payment Order an order by a depositor requesting a bank not to pay on a check previously issued
Summarizing bringing accounting data together in a way that will further enhance its usefulness, usually by means of reports and statements
Supplies a type of asset hat will be consumed as it is used
T-account a skeleton form of an account used for instrutional puposed
tak home pay the amount of pay after deductions have been subtracted
Tangible assets those assets hat can be appraised by balue or seen or touched
Temporary Owner's Equity Accounts accounts utilized to accumulate income, expenses and owner's wih rawals for one accounting period only
Time/term of NOte period of itme from the date of the note to thematurity 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 writen with the diits in incorrect order
Rial Balance a work paper proving the equality of the debit and credit balances in the ledger
U.C.F. Uncollectible Funds
Useful Life estimated life of a fixed asset
W-2 Form wage and tax staement; report furnished by the employer for each employee indicating gross earnings and deuctions fo rincome and F.I.C.A. taxes
W-4 Form employee' Wiholding Allowance Certificate
Wage form of ocmpensatino usually for skilled and unskilled labor, expressed in terms of hours, weeks or pieces completed
Worksheet expanded trial balance utilized for computing, classifying, and sorting account balances before preparing the formal finalncial statements
Created by: Hocker on 2011-08-07



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