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Business Accounting

Business Accounting Vocabulary

TermDefinition
account A separate record used to summarize changes in each asset, liabililty and owner's equity of a business.
account title Provides a description of the particular type of asset, liability, owner's equity, revenue, or expense.
accounting equation The accounting equation consists of the three basic accounting elements: Assets = Liabilities + Owner's Equity.
accounting period concept The concept that income determination can be made on a periodic basis.
accounts payable An unwritten promise to pay a supplier for assets purchased or services received.
accounts receivable An amount owed to a business by its customers as a result of the sale of goods or services.
asset An item that is owned by a business and will provide future benefits.
balance sheet Reports assets, liabilities, and owner's equity on a specific date. It is called a balance sheet because it confirms that the accounting equation is in balance.
business entity An individual, association, or organization that engages in economic activities and controls specific economic resources
business entity concept The concept that nonbusiness assets and liabilities are not included in the business entity's accounting records.
business transaction An economic event that has a direct impact on the business.
capital Another term for owner's equity, the amount by which the business assets exceed the business liabilities.
drawing Withdrawals that reduce owner's equity as a result of the owner taking cash or other assets out of the business for personal use.
expenses The decrease in assets (or increase in liabilities) as a result of efforts to produce revenues.
fiscal year Any accounting period of 12 months' duration
income statement Reports the profitability of business operations for a specific period of time.
input Business transactions provide the necessary input for the accounting information system.
liability Something owed to another business entity.
liquidity A measure of the ease with which as asset will be converted to cash.
net income the excess of total revenues over total expenses for the period.
net loss The excess of total expenses over total revenues for the period.
net worth Another term for owner's equity, the amount by which the business assets exceed the liabilities .
notes payable A formal written promise to pay a supplier or lender a specified sum of money at a definite future time.
operating statement Another name for the income statement, which reports the profitability of business operations for a specific period of time.
output The financial statements are the output of the accounting information system.
owner's equity The amount by which the business assets exceed the business liabilities.
processing Recognizing the effect of transactions on the assets, liabilities, owner's equity, revenues, and expenses of a business.
profit and loss statement Another name for the income statement, which reports the profitability of business operations for a specific period of time.
accountant Designs the accounting information system and focuses on analyzing and interpreting information.
accounting A system of gathering financial information about a business and reporting this information to users.
accounting information systems Accountants in the area design and implement manual and computerized accounting systems.
Accounting Standards Update A standard issued by the Financial Accounting Standards Board. These standards must be followed when preparing financial statements. The updates are included in the FASB Accounting Codification.
analyzing Looking at events that have taken place and thinking about haow they affect the business.
auditing Reviewing and testing to be certain that proper accounting policies and practices have been followed.
bookkeeper Generally supervises the work of accounting clerks, helps with daily accounting work, and summarizes accounting information.
budgeting The process in which accountants help managers develop a financial plan.
Certified Fraud Examiner (CFE) A forensic accountant who has passed the exam offered by the Association of Certified Fraud Examiner
Certified Internal Auditor (CIA) An internal auditor who has achieved professional recognition by passing the uniform examination offered by the Institute o of Internal Auditors.
Certified Management Accountant (CMA) An Accountant who has passed an examination offered by the Institute of Management Accountants.
Certified Public Accountant (CPA) A public accountant who has met certain educational and experience requirements and has passed an examination prepared by the American Institute of Certified Public Accountants
classifying Sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events.
Controller The accountant who oversees the entire accounting process and is the principal accounting officer of a company.
corporation A type of ownership structure in which stockholders own the business. The owners' risk is usually limited to their initial investment, and they usually have very little influence on the business decisions.
cost accounting Determining the cost of producing specific products or providing services and analyzing for cost effectiveness.
Exposure Draft This document explains the rules that FASB believes firms should follow in accounting for a particular event. Based on the responses to the exposure draft, the Board will decide if any changes are necessary before issuing a final standard.
financial accounting Includes preparing various reports and financial statements and analyzing operating, investing, and financing decisions.
Financial Accounting Standards Board Accounting Standards Codification This Codification is an electronic database that provides one authoritative source for the standards which must be followed by U.S. companies.
forensic accounting A specialized field that combines fraud detection, fraud prevention, litigation support, expert witnessing, business valuations, and other investigative activities.
generally accepted accounting principles (GAAP) Procedures and guidelines developed by the Financial Accounting Standards Board to be followed in the accounting and reporting process.
internal auditing Reviewing the operating and accounting control procedures adopted by management to make sure the controls are adequate and being followed; assuring that accurate and timely information is provided.
interpreting Deciding the meaning and importance of the information in various reports.
management advisory services Providing advice to businesses on a a wide variety of managerial issues.
manufacturing business A business that makes a product to sell.
merchandising business A business that buys products to sell.
para-accounting A paraprofessional who provides many accounting, auditing, or tax services under the direct supervision of an accountant.
partnership A type of ownership structure in which more than one person owns the business.
Preliminary Views The first document issued by FASB when developing an accounting standard. This document identifies the pros and cons of various accounting treatments for an event and invites others to comment.
public hearing Following the issuance of a discussion memorandum, public meetings are often held by FASB to gather opinions on the accounting issue.
recording Entering financial information about events affecting the company into the accounting system.
reporting Telling the results of the financial information.
Sarbanes-Oxley Act (SOX) An act passed by Congress to help improve reporting practices of public companies.
service business A business that provides a service.
sole proprietorship A type of ownership structure in which one person owns the business.
summarizing Bringing the various items of information together to determine a result.
tax accounting Services focused on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and other governmental agencies.
taxation See tax accounting-services focused on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and other governmental agencies.
revenues The amount a business charges customers for products sold or services performed.
statement of financial condition or statement of financial position Another name for the balance sheet, which reports assets, liabilities, and owner's equity on a specific date.
statement of owner's equity Reports beginning capital plus net income less withdrawals to compute ending capital.
withdrawals Reduce owner's equity as a result of the owner taking cash or other assets out of the business for personal use.
balance The difference between the footings of an account.
credit To enter an amount on the right side of an account.
credit balance The normal balance of liability, owner's equity, and revenue accounts.
debit To enter an amount on the left side of an account.
debit balance The normal balance of asset, expense, and drawing accounts.
double-entry accounting A system in which each transaction has a dual effect on the accounting elements.
footings The total dollar amounts on the debit and credit sides of an account.
normal balance The side of an account that is increased.
trial balance A list of all accounts, showing the title and balance of each account, used to prove that the sum of the debits equals the sum of the credits.
accounting clerk Records, sorts, and files accounting information.
accrual basis of accounting A method of accounting under which revenues are recorded when earned and expenses are recorded when incurred.
Adjusted Trial Balance columns The third pair of amount columns on the work sheet. They are used to prove the equality of the debits and credits in the general ledger accounts after making all end-of-period adjustments.
adjusting entries Journal entries made at the end of an accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party.
Balance Sheet colulmns The work sheet columns that show the amounts that will be reported in the balance sheet and the statement of owner's equity.
book value The difference between the asset account and its related accumulated depreciation account. The value reflected by the accounting records.
cash basis of accounting A method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid.
contra-asset An account with a credit balance that is deducted from the related asset account on the balance sheet.
depreciable cost The cost of an asset that is subject to depreciation.
depreciation A method of matching as asset's original cost against the revenues produced over its useful life.
fiscal year A 12-month period for which financial reports are prepared.
historical cost principle A principle that requires assets to be recorded at their actual cost.
Income Statement colulmns The work sheet columns that show the amounts that will be reported in the income statement.
market value The amount an item can be sold for under normal economic conditions.
matching principle A principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues.
modified cash basis A method of accounting that combines aspects of the cash and accrual methods. It uses the cash basis for recording revenues and most expenses. Exceptions are made when cash is paid for assets with useful lives greater than one accounting period.
plant assets Assets of a durable nature that will be used for operations over several years. Examples include buildings and equipment.
revenue recognition principle Revenues should be recognized when earned, regardless of when cash is received from the customer. Revenues are considered earned when a service is provided or a product is sold.
salvage value The expected market value of an asset at the end of its useful life.
straight-line method A depreciation method in which the depreciable cost is divided by the estimated useful life.
undepreciated cost The difference between the asset account and its related accumulated depreciation account. Also know as book value.
useful life The period of time that an asset is expected to help produce revenues.
work sheet A form used to pull together all of the information needed to enter adjusting entries and prepare the financial statements.
account form of balance sheet A balance sheet in which the assets are on the left and the liabilities and the owner's equity sections are on the right.
accounting cycle The steps involved in accounting for all of the business activities during an accounting period.
classified balance sheet A balance sheet with separate categories for current assets; property, plant, and equipment; current liabilities; and long-term liabilities
closing process The process of giving zero balances to the temporary accounts so that they can accumulate information for the next accounting period.
current liabilities Liabilities that are due within either one year or the normal operating cycle of the business, whichever is longer, and that are to be paid our of current assets.
Income Summary A temporary account used in the closing process to summarize the effects of all revenue and expense accounts.
long-term debt / long-term liabilities Obligations that are not expected to be paid within a year and do not require the use of current assets.
operating cycle The period of time required to purchase supplies and services and convert them back into cash.
permanent accounts Accounts that accumulate information across accounting periods; all accounts reported on the balance sheet.
plant assets / property, plant, and equipment Assets that are expected to serve the business for many years. Also called plant assets or long-term assets.
post-closing trial balance Prepared after posting the closing entries to prove the equality of the debit and credit balances in the general ledger accounts.
report form of balance sheet A balance sheet in which the liabilities and the owner's equity sections are shown below the assets section.
temporary accounts Accounts that do not accumulate information across accounting periods but are closed, such as the drawing account and all income statement accounts.
Created by: jtisdale