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BK Terms #2

TermDefinition
Data Entry Error The amount was written incorrectly or under the incorrect account.
Debits An increase in assets or expenses or a decrease in liabilities, owner's equity, or revenue.
Dedicated Accounting Software Specialized computer programs designed specifically for managing and recording financial transactions, generating financial statements, and performing various accounting tasks.
Deferral An entry to record a current payment or expense at a later period when the money has been earned or incurred.
Deferred Revenue (Unearned Revenue) Revenue that is paid to the business for work not yet performed, recorded in books as liability.
Depreciation Spreading out the cost of an item over the expected life of the item.
Depreciation expense Depreciation expense is the cost of an asset that has been depreciated for a single period. It shows how much of the asset's value has been used up in that year.
Discrepancy An inconsistency between the books and supporting documentation.
Disposition When the business removes, sells, or disposes of an asset.
Dividend Dividends are what a business pays out to shareholders from business earnings.
Double Entry Accounting A method of bookkeeping that uses at least 2 entries, a debit and a credit, for every transaction.
Draw When an owner takes funds from their business holdings for individual use.
Efficiency How effectively a business is doing something over a given period of time.
Employee Someone who may be eligible for benefits (such as medical), and the business is responsible for collecting and paying income taxes on them.
Employee Vacation Payable A place to store wages for salaries dispersed when an employee is using paid time off/vacation pay.
Equity Owner's stake in the business, how much they have invested or withdrawn.
Error of Commission A type of data entry error where the bookkeeping entry was made to the correct type of account but the wrong customer/item, for example customer X paid an invoice, but it was credited to customer Y's account.
Error of Omission A transaction is missing.
Error of Original Entry (Transportation) During data entry, a type of data entry error where the numbers were flip-flopped. For example, $87.50 entered as $85.70.
Error of Principle in Accounting A type of data entry error where the bookkeeping entry is made to the wrong type of account, for example a sale is credited to an expense account instead of a sales account.
Exempt Exempt classification indicates that an employee isn't subject to overtime pay benefits once they've worked over 40 hours per week. Typically, a salaried employee.
Federal Insurance Contributions Act (FICA) Taxes going into Medicare and Social Security. This is paid by both employees and employers. An amount on the pay stub indicates the portion the employee contributed.
Federal Unemployment Tax Act (FUTA) A payroll tax that only the employer pays.
Financial Analysis Financial analysis involves reviewing and comparing a business's financial performance over time.
Financial Ratios Showcase a relationship between two or more accounting numbers that are taken from the financial statements.
Financial Statements Financial statements, including balance sheets, income statements, and cash flow statements, detail a business’s financial performance and help manage expenses and debts.
Financing Acitivites Part of the statement of cash flows that includes paid-in capital or owner's draws.
Finished Goods Completed products readily available for sale to a business's customers.
First In, First Out (FIFO) The business considers the first units purchased (First In) to be the first units sold (First Out).
General Ledger (or Ledger) Provides a record of each financial transaction that takes place during the life of an operating business and contains all accounts needed to prepare financial statements.
Gross Pay (Gross Wages) The total amount earned by an employee for a pay period before any deductions.
Gross Profit Total revenue minus cost of goods sold.
Gross Profit Margin The earnings a business makes per item sold. For example, an item that costs $4 to make and sells for $10 has a $6 (60%) profit margin.
Historical Cost Historical cost is a measure of value used in accounting in which the value of an asset on the balance sheet is recorded at its original cost when acquired by the business.
Honesty Owning any mistakes and doing everything you can to fix them and being open and transparent with your client about the state of their finance.
Horizontal Analysis Compares historical financial information over a series of reporting periods.
Hospital Insurance (HI or Medicare Tax) A part of Federal Insurance Contributions Act (FICA).
In transit A transaction recorded on the books but not yet processed and cleared by the bank.
Income Statement Also called the profit and loss (P&L) statement, the income statement shows the business's revenues and expenses during a particular period
Independent Contractor Considered self-employed and are contracted to provide services as a non-employee, therefore must pay taxes independently and are not eligible for benefits or regular employees.
Insolvency When a business is unable to pay their debts when they become due.
Interest Rate The percentage of the existing principal loan balance you must pay to the lender for borrowing money.
Inventory Inventory, or stock, is the raw material a business uses in production or finished goods ready to sell.
Investing activities Part of the statement of cash flows that includes all cash inflow and outflows related to purchasing fixed assets or investing in another business or venture.
Inventory Reconciliation Compare purchase orders and inventory counts to the numbers in the books. Verify that descriptions, quantities and prices are entered correctly.
Inventory Valuation The process used to assign cost to the inventory on the balance sheet.
Invoice An invoice is a bill that details what you bought or did for someone. It usually includes the price and payment details. Stores and service providers give invoices when you purchase or hire their services.
Created by: noodlee
 

 



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