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Worsham Accounting
Glossary terms for the accounting comprehensive final
| Question | Answer |
|---|---|
| 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:
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