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WGU- D102
Financial Accounting - D102
| Term | Definition |
|---|---|
| Account | An accounting record in which the results of transactions are accumulated; shows increases, decreases, and a balance |
| Accounts Receivable | A current asset representing money due for services performed or merchandise sold on credit |
| Accrual Accounting | The process of recording expenses and revenues when incurred and earned, regardless of when cash is received, and of adjusting original transaction data into refined measures of a firm's past economic performance and current economic condition |
| Accrual Basis Accounting | A system of accounting in which revenues and expenses are recorded as they are earned and incurred, not necessarily when cash is received or paid |
| Accumulated Depreciation | Reflects the wear and tear, or depreciation, of items since they were originally purchased |
| Additional Paid-in Capital | Capital invested by stockholders that exceeds the par value of the issued shares |
| Adjusting Entries | Entries required at the end of each accounting period to recognize, on an accrual basis, revenues and expenses for the period and to report proper amounts for asset, liability, and owners' equity accounts |
| Allowance Method | The recording of estimated losses due to uncollectible accounts as expenses during the period in which the sales occurred |
| Allowance for Bad Debts | A contra account, deducted from accounts receivable, that shows the estimated losses from uncollectible accounts |
| Amortization | The process of cost allocation that assigns the original cost of an intangible asset to the periods benefited |
| Articulation | The interrelationship among the financial statements |
| Assets | Economic resources that are owned or controlled by a company |
| Audit Committee | Members of a company’s board of directors who are responsible for dealing with the external and internal auditors |
| Average Costing | An inventory cost flow assumption whereby cost of goods sold and the cost of ending inventory are determined by using an average cost of all merchandise available for sale during the period |
| Bad Debt Expense | An account that represents the portion of the current period's credit sales that are estimated to be uncollectible |
| Bad Debts | An uncollectible account receivable |
| Balance Sheet | A listing of an organization's assets and of its liabilities at a certain time |
| Bank Reconciliation | The process of systematically comparing the cash balance as reported by the bank with the cash balance on the company's books and explaining any differences |
| Board of Directors | Individuals elected by the stockholders to govern a corporation |
| Bonus | Additional compensation beyond the regular compensation that is paid to employees if certain objectives are achieved |
| Book Value | For a long-term operating asset, the asset’s original cost less any accumulated depreciation |
| Business Documents | Records of transactions used as the basis for recording accounting entries; include invoices, check stubs, receipts, and similar business papers |
| Calendar Year | An entity's reporting year, from January 1 to December 31 |
| Cash | Coins, currency, money orders, checks, and funds on deposit with financial institutions. |
| Cash Basis Accounting | A system of accounting in which transactions are recorded and revenues and expenses are recognized only when cash is received or paid |
| Cash Collection | The recovery of cash from a business or individual with which you have previously entered into a transaction. |
| Cash Dividends | A cash distribution of earnings to stockholders |
| Cash Equivalents | Short-term, highly liquid investments such as Treasury bills, commercial paper, and money market funds |
| Chart of Accounts | A systematic listing of all accounts used by a company |
| Closing Entries | Entries that reduce all nominal (temporary) accounts to a zero balance at the end of each accounting period, transferring their preclosing balances to a permanent balance sheet account |
| Common Stock | The most frequently issued class of stock; typically provides a voting right but is secondary to preferred stock in dividend and liquidation rights |
| Compound Interest | Interest earned on your interest |
| Compound Journal Entry | A journal entry that involves more than one debit or more than one credit or both |
| Consignment | An arrangement whereby merchandise owned by one party, the consignor, is sold by another party, the consignee, usually on a commission basis |
| Consolidated Financial Statements | Statement that combines the financial results of a “parent company" with other companies that it owns, called subsidiaries |
| Contingency | Circumstance involving potential losses or gains that will not be resolved until some future event occurs |
| Contra Account | An account that is offset or deducted from another account |
| Contributed Capital | The portion of owners' equity contributed by investors (the owners) in exchange for shares of stock |
| Control Activities | Policies and procedures used by management to meet their objectives |
| Control Environment | The actions, policies, and procedures that reflect the overall attitudes of top management about control and its importance to the entity |
| Control Procedures | Policies and procedures used by management to meet their objectives |
| Convertible Preferred Stock | Preferred stock that can be converted by the shareholder to common stock at a specified conversion rate |
| Corporate Charter | A written document filed by the founders of a corporation with the state in which the corporation is registered. It details the major components of a company, such as its objectives, structure, and planned operations |
| Cost of Goods Sold | The costs incurred to purchase or manufacture the merchandise sold during a period |
| Credit (Abbreviated Cr) | An entry on the right side of a T-account |
| Current Assets | Cash, accounts receivable, and inventory |
| Current Liabilities | Those obligations expected to be paid within one year, the most common being accounts payable |
| Date of Record | The date selected by a corporation's board of directors on which the stockholders of record are identified as those who will receive dividends |
| Debit (Abbreviated Dr) | An entry on the left side of a T-account |
| Declaration Date | The date on which a corporation's board of directors formally decides to pay a dividend to stockholders |
| Declining-balance Depreciation Method | An accelerated depreciation method in which an asset’s book value is multiplied by a constant depreciation rate (such as double the straight-line percentage, in the case of double-declining-balance) |
| Depreciation | The process of cost allocation that assigns the original cost of plant and equipment to the periods benefited |
| Detective Controls | Internal control activities that are designed to detect the occurrence of errors and fraud |
| Development | The application of a company's research findings to develop a plan or design for new or improved products and processes as part of a company's larger (R&D) activities |
| Direct Write-off Method | The recording of actual losses from uncollectible accounts as expenses during the period in which accounts receivable are determined to be uncollectible |
| Discount | The process of converting future values into present values |
| Dividend Payment Date | The date on which a corporation pays dividends to its stockholders |
| Dividends | Distributions to the owners (stockholders) of a corporation |
| Earnings Per Share (EPS) | A company's net income divided by the number of outstanding shares held by shareholders |
| Estimated Useful Life | The life over which it is estimated that an asset will be used by a company |
| Executory Contract | It is an exchange of promises about the future |
| Expanded Accounting Equation | Assets = Liabilities + Paid-in Capital + (Revenues - Expenses - Dividends) |
| Expenses | The value of resources used in generating the reported revenue |
| FIFO (First In, First Out) | An inventory cost flow assumption whereby the first goods purchased are assumed to be the first goods sold so that the ending inventory consists of the most recently purchased goods |
| FOB (Free-on-board) Destination | A business term meaning that the seller of merchandise bears the shipping costs and maintains ownership until the merchandise is delivered to the buyer |
| FOB (Free-on-board) Shipping Point | A business term meaning that the buyer of merchandise bears the shipping costs and acquires ownership at the point of shipment |
| Financing Activities | Obtaining resources from owners and providing them a return on their investment; obtaining resources from creditors and repaying those borrowings |
| Finished Goods | Manufactured products ready for sale |
| Fiscal Year | An entity’s reporting year, covering a 12-month accounting period |
| Franchise Agreement | An exclusive right or privilege received by a business or individual to perform certain functions or sell certain products or services |
| Freight in | The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point |
| GAAP | (Generally accepted accounting principles); A common set of accepted accounting principles, standards, and procedures that companies and their accountants must follow when they compile their financial statements |
| Generally Accepted Accounting Principles (GAAP) | A common set of accepted accounting principles, standards, and procedures that companies and their accountants must follow when they compile their financial statements |
| Gross Profit | The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services |
| Gross Profit Percentage | The margin earned (as a percentage) on a product or service after applying the total production cost to the revenue earned |
| Gross Sales | Total recorded sales before sales discounts and sales returns and allowances |
| Independent Checks | Procedures for continual internal verification of other controls |
| Initial Public Offering | The first time a private company publicly offers shares of its stock on the open market; this is sometimes referred to as "going public" |
| Intangible Assets | Rights and privileges that are long-lived, are not held for resale, have no physical substance, and usually provide their owner with competitive advantages over other firms |
| Inventory | Goods held for resale |
| Inventory Shrinkage | The amount of inventory that is lost, stolen, or spoiled during a period |
| Investing Activities | Cash inflows and outflows from (1) acquiring and selling productive assets such as PPE; (2) acquiring and selling investment securities; and (3) lending money and collecting on those loans |
| Journal | An accounting record in which transactions are first entered; provides a chronological record of all business activities |
| Journal Entry | A recording of a transaction where debits equal credits; usually includes a date and an explanation of the transaction |
| Journalizing | Recording transactions in a journal |
| LIFO (Last In, First Out) | An inventory cost flow assumption whereby the last goods purchased are assumed to be the first goods sold so that the ending inventory consists of the first goods purchased |
| Ledger | A book of accounts in which data from transactions recorded in journals are posted and thereby summarized |
| Liabilities | The economic obligations of a company, composed primarily of the money or services that the company owes to its creditors |
| Long-term Investments | Those assets that you expect to still be around next year when you prepare the balance sheet again |
| Manufacturing Overhead | The indirect manufacturing costs associated with producing inventory |
| Matching Principle | The concept that all costs and expenses incurred in generating revenues must be recognized in the same reporting period as the related revenues |
| Mortgage Payable | A written promise to pay a stated amount of money at one or more specified future dates; certain assets, usually real estate, are pledged as collateral |
| Multiple-step Income Statement | A statement format that emphasizes the presentation of gross profit and operating income |
| NSF (Not Sufficient Funds) Checks | A check that is not honored by a bank because of insufficient cash in the check writer's account |
| Net Income (Net Loss) | The difference between revenues and expenses |
| Net Sales | Gross sales less sales discounts and sales returns and allowances |
| Nominal Accounts | Accounts that are closed to a zero balance at the end of each accounting period; temporary accounts generally appearing on the income statement |
| Obsolescence | A notable decrease in the worth or utility of an inventory item; typically results in a write-down of the inventory item to reflect its reduced value |
| Operating Activities | All transactions relating to a company's delivering or producing its goods for sale and providing its services |
| Organizational Structure | Lines of authority and responsibility |
| Original Cost | The cost at which an asset is recorded on the books of a company |
| Owners' Equity | The residual interest in the assets that remain of an entity after its liabilities have been deducted |
| Par Value | The stated value or face value of a share of stock |
| Patent | An exclusive right granted by the government to the owner of a product, process, or idea |
| Periodic Inventory System | A system of accounting for inventory in which cost of goods sold is determined and inventory is adjusted at the end of the accounting period, not when merchandise is purchased or sold |
| Perpetual Inventory System | A system of accounting for inventory in which detailed records of the number of units and the cost of each purchase and sales transaction are prepared throughout the accounting period |
| Physical Safeguards | Physical precautions used to protect assets and records |
| Post-closing Trial Balance | A listing of all real account balances after the closing process has been completed; tests whether total debits equal total credits for all real accounts prior to beginning a new accounting cycle |
| Posting | The process of transferring amounts from the journal to the ledger |
| Preferred Stock | A class of stock that usually provides dividend and liquidation preferences over common stock |
| Prepaid Expenses | Payments made in advance for items normally charged to expense |
| Present Value of $1 | The value today of $1 to be received or paid at some future date, given a specified interest rate |
| Preventative Controls | Internal control activities that are designed to prevent the occurrence of errors and fraud |
| Promissory Note | An agreement under which the borrower promises to pay back the principal amount with interest over a predetermined time period |
| Property Taxes | Taxes imposed by county or city governments on land, buildings, and other company assets |
| Property, Plant, and Equipment (PPE) | Tangible, long-lived assets acquired for use in business operations that include land, buildings, machinery, equipment, and furniture |
| Prospectus | A report provided to potential investors that represents a company's financial statements and explains its business plan, sources of financing, and significant risks |
| Purchase Discount | When a retailer gets a reduction from their wholesalers for paying quickly |
| Purchase Return | When unsatisfactory merchandise purchased by a buyer is returned to the supplier |
| Raw Materials | Materials purchased for use in manufacturing products |
| Real Accounts | Accounts that are not closed to a zero balance at the end of each accounting period; permanent accounts appearing on the balance sheet |
| Receivables | Claims for money, goods, or services |
| Research | An activity undertaken by a company to discover new knowledge that will be useful in developing new products, services, or processes as part of a company's larger (R&D) activities |
| Revenue | The value of the goods and services provided by a company in its business operations |
| Revenue Recognition | The process of recording revenue in the accounting records; occurs after the work has been substantially completed and cash collection is reasonably assured |
| Revenue Recognition Principle | The idea that revenues should be recorded when (1) the earnings process has been substantially completed and (2) cash has either been collected or collectibility is reasonably assured |
| Sales Discounts | A reduction in the selling price allowed if payment is received within a specified period |
| Sales Returns and Allowances Account | A contra-revenue account in which the return of, or allowance for reduction in the price of, merchandise previously sold is recorded |
| Sales Tax | A tax imposed by the government on the sale of goods and services |
| Salvage Value | The amount expected to be received when an asset is sold at the end of its useful life |
| Segregation of Duties | A strategy to provide an internal check on performance through separation of authorization of transactions from custody of related assets, operational responsibilities from record-keeping responsibilities, and custody of assets from accounting personnel |
| Shareholders | Those who own a corporation by owning shares of stock in that corporation; also called stockholders |
| Social Security (FICA) Taxes | Federal Insurance Contributions Act taxes imposed on the employee and the employer; used mainly to provide retirement benefits |
| Specific Identification | A method of valuing inventory and determining cost of goods sold whereby the actual costs of specific inventory items are assigned to them |
| Statement of Cash Flows | Statement that summarizes a company's cash flows for a period of time |
| Stockholders | Individuals or organizations that own a portion (shares of stock) of a corporation |
| Stockholders' Equity | The difference between assets and liabilities in a corporation |
| Straight-line Depreciation Method | The depreciation method in which the cost of an asset is allocated equally over the periods of an asset’s estimated useful life |
| T-account | A simplified depiction of an account in the form of a letter T |
| Time Period Concept | The idea that the life of a business is divided into distinct and relatively short time periods so that accounting information can be timely |
| Trademark | A distinctive name, symbol, or slogan that distinguishes a product or service from similar products or services |
| Transaction Analysis | The process of determining how an economic event impacts the financial statements |
| Treasury Stock | The repurchased shares when a company buys back its own shares |
| Trial Balance | A listing of all account balances; provides a means of testing whether total debits equal total credits for all accounts |
| Unearned Revenues | Cash amounts received before they have been earned |
| Unrecorded Liabilities | Expenses incurred during a period that have not been recorded by the end of that period |
| Unrecorded Receivables | Revenues earned during a period that have not been recorded by the end of that period |
| Work-in-process | Partially completed units in production |
Created by:
Jesuisbanan
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