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BK Terms #3
| Term | Definition |
|---|---|
| Last In, First Out (LIFO) | The business considers the most recently units purchased (Last In) to be the first units sold (First Out). |
| Lease | A Lease is an agreement to pay rent for a specific period of time for the right to use an asset. |
| Liability | What the business owes to others. |
| Limited Liability Company (LLC) | A business structure that is owned by one or more persons, but they do not carry any personal liability. |
| Liquidity | In business, it indicates a business's capacity to pay down its short-term liabilities and it is typically expressed as a ratio or percentage. |
| Loan Amount | The amount of the loan taken out. |
| Loan Structure | The actual terms of the loan regarding the repayment schedule. |
| Lockbox System | Businesses can direct customers to send payments to a lockbox system, which is a bank-operated mailing address. The bank handles all incoming funds and sends the payment information to the business's accounting department. |
| Long Term (Fixed) Assets | Long term, or fixed assets, are acquired for the long-term benefit of the business. They extend beyond a year. |
| Long-term Liabilities | Debt obligations that will not come due within one year. |
| Matching Principle | Revenues and their associated expenses should be recognized in the same reporting period. |
| Merchandise | Finished goods a business buys from a supplier for future resale. |
| Mortgage | A special type of long-term loan for the purchase of a property or structure, they are generally longer term than most loans. |
| Natural Balance | In financial accounting, certain accounts have a normal debit or credit balance, similar to the trial balance. Assets and expenses have a debit balance, while liabilities, revenues, and equity accounts have a credit balance. |
| Net Assets | The amount of value that remains for the owners or shareholders of the business once all debts and obligations are accounted for. |
| net cash increase/decrease | From the statement of cash flow, total net cash difference between the beginning and ending of the period from operating, investing, and financing sections. |
| Net Pay | The amount an employee takes home. This is the total amount their paycheck is worth or is deposited for that pay period. |
| Net Profit/Income | The total of subtracting all expenses (including taxes) from the total revenue. |
| Net Sales | Gross (total) sales minus any returns or discounts. |
| Non-Sufficient Funds Check | Non-Sufficient Funds (NSF) Checks have bounced, meaning that the check has not been paid because the issuer did not have enough money in their bank account. Also called a "rubber check". |
| Non-Exempt | NonEexempt classification indicates that an employee is subject to overtime pay benefits once they have worked over 40 hours per week. Typically, an hourly employee. |
| Nonprofit Corporations | A business structure that is founded by one or more people, but no person/group is considered the owner as they are considered public organizations governed by a board of directors. Founders do not carry any personal liability. |
| Notes Payable | Notes Payable is money that a business owes, so it's a liability. |
| Notes Recievable | Notes Receivable is money that is owed to a business, so it is considered an asset. |
| OASDI/Social Security | Another term for Social Security. Stands for old age, survivors, and disability insurance tax. This is part of Federal Insurance Contributions Act (FICA). |
| Objectivity | Never allowing another party to influence your findings or letting personal bias get in the way of performing your duties. |
| Operating Activities | From the statement of cash flow, includes all cash inflows and outflows related to operating a business. |
| Operating Expenses | The day-to-day expenses incurred as the business generates revenue directly associated with the core business activities. |
| Operating Profit | The profitability of a business's core operations before interest, taxes, and non-operating expenses are deducted, calculated by subtracting the total operating expenses from the gross profit. |
| Outstanding | A check or other payment issued that has not yet cleared and been reported on the bank statement. |
| Packing Slips | A document that details the contents of a shipment to the receiving customer. |
| PTO | Considered a benefit. When used, paid wages for time off will be categorized on a pay stub and journal entry under this heading. |
| Partnership | A business structure that is owned by two or more partners who take on unlimited personal liability. |
| Pay or check date | The date pay is given to the employee (pay day). |
| Pay Period | Refers to the frequency payrolls are run by a business. |
| Payroll Records | Employee timecards or other internal business documents that record an employee's wages and number of working hours for a specific period. |
| Periodicity Assumption | A business can report its financial results within specific time periods. This usually involves reporting results and cash flows regularly, such as monthly, quarterly, or annually. |
| Periodic Inventory System | The inventory account is updated only at regular intervals, such as at the end of an accounting period. |
| Perpetual Inventory System | The inventory account is continuously or perpetually updated as products are bought and sold. |
| Petty Cash | Petty cash, a small amount of money kept on hand, covers unexpected expenses and allows for small purchases without receipts. |
| Plant, Property, & Equipment (PP&E) | PP&E are a business's long-term assets that are expected to generate economic benefits and contribute to revenue for many years. Investment in PP&E is also called a capital investment. |
| Professionalism | Being courteous and considerate, avoiding any activity that could bring shame to the profession or client, and maintaining proper credentials and skills. |
| Profit - Operating Profit | Total left after taking gross profit minus total operating expenses. |
| Profit (Loss) Before Taxes | Total of Operating Profit (loss) and other income (such as interest income). |
| Profit Margin | Calculated from the income statement, a ratio of profit to sales revenue used to assess profitability. |
| Profitability | Measure of financial gain, what percentage of revenue is retained as profit |
| Promissory Note | A promissory note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. |
| Purchase Order | A document that specifies the details of an order for goods or materials. Copies are sent to both the supplier and the business's own accounts payable department for comparison. |
| Raw Materials | The materials used by a business to create products, such as materials to create shirts. |
| Reconciliation | The process of comparing transactions and activity to supporting documentation. |
| Register | A detailed complete transaction history and current of an account. All the account registers make up the chart of accounts. |
| Retained Earnings | From the statement of equity, also shown on the Balance sheet, this is accumulated net income from previous years minus any dividends paid to shareholders. |
| Revenue | Income earned through business, gross proceeds or sales. |
Created by:
noodlee