Dictionary in Accounting

-A-
Account – is a record in an accounting system that tracks the financial
activities of a specific asset, liability, equity, revenue, or expense. These
records increase and decrease as the business events occur throughout the
accounting period.

Account Balance – is the difference between the debits and credits posted to
the account during the current accounting period plus the beginning
balance.

Account Code – Numbers that are used to facilitate recording, arranging and
cross-referencing the accounts

Account Form Balance Sheet – is a financial statement format where the

assets are reported on the left side and the liabilities and equity are reported
on the right side. The account format is kind of a visual representation of
the accounting equation

Accounting – It is the process of identifying and recording business events as

well as presenting and communicating this financial information to end-users
in a meaningful way
Accounting Concepts – Are important assumptions or ideas which
accountants observe on how to record business transaction in the books of
accounts.

Accounting Cycle – a series of steps taken each accounting period

culminating with the preparation of financial statements

Accounting Education – Developing future accountants by creating relevant

accounting curriculum

Accounting Equation – Also called as balance sheet equation forms the

building blocks for the entire double entry accounting system. It shows that
every asset owned by the company is equal to the claims (liabilities and
equity) against the asset. The accounting equation looks like this: (Asset =
Liabilities + Equity); The heart of accounting

Accounting Information – Presented to internal users usually in form of

management accounts, budgets, forecasts and financial statements

Accounting Period – also called a reporting period, is the amount of time

covered by the financial statements
Accounting Profit – also called bookkeeping profit, is the net income that
remains after subtracting the explicit costs from a firm’s total revenues in
accordance with GAAP

Accounting Research – Search and creation of new ideas

Accounts Payable – also called trade payables, is a short-term liability

account used to record debts from purchasing goods or services on credit.

Accounts Payable Ledger – also called the creditors ledger, is a subsidiary

ledger that lists all of the vendors and suppliers that a company owes along
with their account balances and details.

Accounts Receivable – amounts that customers owe for purchases that they
made on credit with a company

Accounts Receivable Ledger – also called the customers ledger, is a

subsidiary ledger that lists all the customers that owe money to the company
along with their current balances.

Accounts Receivable Turnover – an efficiency ratio that measures how often

receivables are collected during a period.

Accrual – represents revenues and expense, which are not recorded on a

firm’s balance sheet

Accrual Accounting Principle – revenue should be recognized when earned

regardless of collection and expenses should be recognized when incurred
regardless of payment.

Accrual Basis of Accounting – A system of recognizing revenues and

expenses when they are incurred instead of focusing on when they are paid
or collected

Accrued Expenses – Costs that are incurred in the current period but not paid
for until the next period

Accrued Liabilities – expenses that a company incurs during a period but

doesn’t pay in the same period

Accumulated Depreciation – the total sum of depreciation expense recorded

for an asset
Activity – Cost accounting term that usually refers to a type of work that was
done

Actual Cost – Amount of money that was paid to acquire a product or asset

Adjusted Trial Balance – list of accounts and their balances at the end of an
accounting period after the adjusting journal entries have been posted

Adjusting Entries – adjustment recorded at the end of an accounting period

to an asset or liability account and related expense or income accounts to
record business events that occurred in the period but were not recorded

Allowance for Doubtful Accounts – also called the allowance for uncollectible
accounts, is a contra asset account that records an estimate of the accounts
receivable that will not be collected

Annual Financial Statements – financial reports based on a 12-month

consecutive time period

Annual Report – financial summary of a company’s activities during the year

along with management’s analysis of the company’s current financial position
and future plans

Asset – Resource that owned or controlled by a company and will provide a

benefit in current and future periods for the business (Examples: Cash,
Building, Land, Equipment)

Assumptions – Provide a foundation for the accounting process

Audit – analysis or study of an accounting system that summarizes its finding

with an opinion on the accuracy of the system and its reports

Auditing – A systematic and independent examination of books, accounts,

statutory records, documents and vouchers of an organization to ascertain
how far the financial statements as well as non-financial disclosures present a
true and fair view of the concern

-B-
Bad Debt Expense – receivable that is no longer collectable, also called an
uncollectable account

Balance Column Account – more detailed version of a T-account

Balance Sheet – uses the accounting equation (assets = liabilities + owner’s
equity) to show a financial picture of the business on a specific day; lists all of
the assets that a company owns as well as the debts owed by the company
and the owner’s interest or ownership share in the company

Balance Sheet Equation – Forms the building blocks for the entire double
entry accounting system. The balance sheet equation looks like this: (Asset =
Liabilities + Equity)

Bank Note – also called paper money or bills, is a form of bearer promissory
note issued by a bank and payable on request

Bank Reconciliation – Bank rec is a report used to check and explain the
differences between the cash balance in a company’s accounting ledger and
the bank statement balance

Bank Statement – Report issued by a bank to its depositor document the

account balance and activity during the period

Blank Space – Separates individual journal entries and makes the entire
journal easier to read

Bonds – A written agreement or contract between an issuer and the holder

that requires the issuer to pay the holder the bond’s par value or face value
plus the stated amount of interest
Book Keeping – Often called record keeping, is the part of accounting that
records transactions and business events in the form of journal entries in the
accounting system

Bounced Check – Also called a bad check, is a non-sufficient funds check that
cannot be processed because there isn’t enough money in the account to
clear it.

Bureau of Treasury (BTR) – Safe keeping of the national funds; Maintain

accounts of financial transactions of all natural government agencies

Business – An organization or entity that sells goods or services for a profit

Business Entity Principle – An accounting principle that requires a business to

be accounted for and treated as a separate entity from its owners

-C-
Capital – Refers to the financial resources that businesses can use to fund
their operations like cash, machinery, equipment and other resources

Capitalization – Process of recording an expense or cost in a permanent

account and systematically allocating over future periods

Cash – The most liquid asset a company can own; Money composed of bills,
coins and other items on hand and in bank considered as legal tender

Cash Basis Principle – An accounting system that recognizes and records

income and expenses as they are paid in cash

Cash Disbursement Journal – Also called the cash payments journal, is

a journal used record and track all the cash payments or disbursements by a
company

Cash Discount – Also called a purchase discount or sales discount, is a

reduction in the purchase price of a good because of early cash payment

Cash Dividends – Represent ownership to a firm’s distributed profits to

shareholders and provide an incentive to investors to own the shares of large
companies, even if they are not growth-oriented

Cash Equivalents – Are short-term assets that are easily and readily converted
into a known amount of cash
Cash Flow Analysis – Evaluation of a company’s cash inflows and outflows
from operations, financing activities, and investing activities

Cash Managements – The efficient collection, disbursement, and investment

of cash in an organization while maintaining the company’s liquidity

Cash Receipts – Collection of money, typically from a customer, which

increases (debits) the cash balance recognized on a company’s balance sheet

Cash Receipts Journal – A special section of the general journal specifically

used to record all receipts of cash

Charge Invoice – Also called as sales invoice; A document used when a service
has been rendered, but the client will be billed only after a certain number of
days from the date of service. Often, a company will issue a statement of
account to a customer, with the charge or sales invoice attached

Chart of Accounts – A list of all accounts in the general ledger used by a

company; Foundation of financial statements
Check – An order written by a depositor instructing the bank to pay a specific
amount to a recipient from the depositor’s bank account

Chief Executive Officer (CEO) – Often times referred to as the President of an

organization, is appointed by the board of directors to be the highest ranking
member of management within the organization and responsible for
overseeing all company operations
Chief operating Officer (COO) – Often called the Director of Operations, is a
corporate executive who ensures the day-to-day operations and general
administration of business are working properly

CIMA – Chartered Institute of Management Accountants

COA – Commission on Audit

Collateral – An asset that a borrower provides to a lender in event that he

defaults on a loan or other line of credit

Communicating – Occurs through, preparation and distribution of financial

and other accounting reports

Compatibility Principle – An information system concept that suggests the

accounting system of any company should adapt to their operations,
employees, and business structure

Compound Journal Entry – One that affects three or more accounts; An entry
that debits or credits at least three accounts in the general ledger

Comprehensive Income – The net change in equity for a period not including
any owner contributions or distributions

Conservatism Principle – Prudence; In case of doubt, assets and income

should not be overstated while liabilities and expenses should not be
understated.

Contra Account – An account linked to another account with an opposite

reporting balance designed to reduce the amount in the other account
(Example: Accumulated Depreciation, bond discount account)
Cooperative – Duly registered association of persons with common bond of
interest, voluntary joining together to achieve their social, economic and
cultural needs

Copy Rights – The exclusive legal right, given to an originator or an assignee

to print, publish, perform, film, or record literary, artistic, or musical material,
and to authorize others to do the same

Corporation – A legal form of business that is separate from its owners

Cost – An expenditure required to produce or sell a product or get an asset

ready for normal use

Cost Accounting – Subset of management accounting; Refers to recording,

presentation and analysis of manufacturing costs

Cost of Goods Available for Sale – Is the price paid for inventory that is ready
for customers to purchase

Cost of Goods Manufactured (COGM) – Also called cost of goods completed,

calculates the total value of inventory that was produced during the period
and is ready for sale

Cost of Goods Sold (COGS) – Also called the cost of sales, is total price of all
inventory sold to customers during a period

Cost of Sales – Also known as the cost of goods sold (COGS), represents the
direct costs related to the manufacturing or purchasing of a good that is sold
to a customer

Cost Principle – An accounting concept that requires the numbers on the

financial statements be based on actual expenses from business transactions
incurred during the period

Credit – Sometimes abbreviated CR, is an accounting term for an entry made

on the right side of an account

Credit Balance – The amount of money credited to a margin account after a

short sale transaction is successfully completed

Credit Memo – Also called a memorandum, is a document issued by a seller

that reduces the amount owed by a client from a previous invoice
Credit Memorandum – Often called a credit memo, is a notification that from
the sender indicating that it credited the recipient’s account in its records

Credit Terms – Or terms of credit are the agreement between a seller and
buyer that lists the timing and amount of payments the buyer will make in the
future

Creditor – A lender that is entitled to receive a payment from a borrower

Creditors – Determines the credit worthiness of an organization

Current Asset – Also called a short-term asset, is a resource expected to be

used to benefit a company within a year or the current accounting period
(Example: Cash, Accounts Receivable, Prepaid Expenses)

Current Liability – An obligation that must be repaid within the current

period or the next year whatever is longer (Example: Accounts Payable,
Interest Payable, Accrued Expenses)

Customers – Assessing financial position of suppliers

-D-
Date of Payment – Is the day that a company actually pays its dividends

Days’ Sales in Inventory – An inventory management ratio that measures the

number of days’ inventory will be in stock at the current sales levels

DBM – Department of Budget and Management

DBM – Department of Budget and Management

Debit – An accounting term for an entry made on the left side of an account.
Many times debit is abbreviated as Dr.

Debit Memorandum – Or debit memo for short, is notification from a buyer

to a seller that tells the seller that a debit was made in the seller’s account on
the buyer’s books

Deferred Expense – Also called a prepaid expense, is a cost that has been
incurred but is recorded as an asset until the related goods or services are
consumed
Deferred Payment – An agreement between the lender and borrower
allowing the borrower to take possession of goods immediately and start
making payments in the future

Depreciation – The cost allocated to a fixed asset during a period

Direct Labor – Pertains to labor used in manufacturing a product which can

be used in manufacturing a product which can be charged directly to a
particular product

Direct Materials – Raw materials used to come up with a product

Direct Method – Is a way to present and prepare the statement of cash

flows by listing the operation cash receipts and payments in the cash from
operations section

Disclosure Principle – All relevant and material information should be

reported

Dividend – A corporate payment of assets or earnings to shareholders

Double Entry Accounting – A system of recording business transactions

where each transaction affects at least two accounts and requires an equal
debit and credit

-E-
Early payment discount – Often a 1% or 2% reduction in the amount owed if an
invoice is paid within 10 days of the invoice date instead of the customary 30
days.

Earned – Under accrual accounting an item has been "earned" and is

reported as revenue when a service has been performed or the ownership to
a product has been transferred from the seller to the buyer (not when cash is
received).

Equity – The difference between assets and liabilities, such as stockholders'

equity, owner's equity, or a nonprofit organization's net assets. Also used to
indicate an owner's interest in a personal asset

Expenditure – Is funds used by a business, organization, or corporation to

attain new assets, improve existing ones, or reduce a liability
Expense – Costs that are matched with revenues on the income statement.
Generally, expenses are debited to a specific expense account and the normal
balance of an expense account is a debit balance

External Auditing – examination of financial statements by an independent

CPA with the purpose of expressing an opinion as to fairness of presentation
and compliance with the GAAP

External Users – A person outside of an organization who does not directly

run its operations and uses financial or accounting information about that
company to make decisions

-F-
Factory Overhead or Expenses – To indirect elements of cost incurred to
produce a finished product

Financial accounting – Refers to the accounting associated with the

preparation of the main financial statements: income statement, balance
sheet, statement of cash flows, statement of retained earnings, statement of
stockholders' equity.

Financial statements – Usually financial statements refer to the balance

sheet, income statement, statement of cash flows, statement of retained
earnings, and statement of stockholders' equity.

Fiscal Year – Is the 12-month period chosen by management to be the

business’ annual accounting period

Fixed assets – A term used when referring to property, plant, and equipment.
Fixed assets other than land are depreciated.

Fixed expenses – Expenses which do not change in response to reasonable

changes in sales or other activity.

Franchise – Is the license to make or sell a product under certain conditions

granted by the owner of these rights

Freight-in – The shipping cost to be paid by the buyer of merchandise

purchased when the terms are FOB shipping point.
Freight-out – Delivery expense to be paid by the seller when its merchandise
is sold with terms of FOB destination. This is an operating expense and is not
included in the cost of merchandise.

-G-
GAA – General Appropriation Act

GAAP – Stands for Generally Accepted Accounting Principles; Make up the

rules and concepts of financial accounting that are generally accepted in the
United States

Gains – Gains result from the sale of an asset (other than inventory). A gain is
measured by the proceeds from the sale minus the amount shown on the
company's books.

General and Administrative Expenses – Pertain to operation expenses rather

than to expenses that can be directly related to the production of any goods
or services, including rent, utilities, insurance, and managerial salaries

General Journal – A book of original entry that requires that both the account
being debited and the account being credited be listed along with the
respective amounts. Because of accounting software and special journals
there are relatively few entries made into the general journal
General Ledger – That part of the accounting system which contains the
balance sheet and income statement accounts used for recording
transactions.

General Purpose Financial Statements – To accommodate the information

needs of persons who have no capability to request or acquire information
directly from the company

Going-Concern Principle – Business is expected to continue indefinitely

Goodwill – A company’s value that exceeds its assets minus its liabilities;
Arises when a buyer acquires an existing business. It is the excess of the
“purchase consideration”

Government Accounting – Involves receipts, spending, transfer usability and

disposition of government funds and property and interpreting the results
there of.

Government Regulatory Agencies – ensure that company’s disclosure of

accounting information is in accordance with rules and regulations set in
order to protect the interest of the stakeholders (Example: SEC, DOLE)
Gross – The amount before deductions. For example, gross pay is the amount
before withholding deductions. Gross sales are the amount before sales
returns and allowances and sales discounts.

Gross Margin – A term that is sometimes used interchangeably with gross

profit. Others use the term to mean the percentage of gross profit dollars
divided by net sales dollars.

Gross Profit – Net sales revenues minus the cost of goods sold.

-H-
Health Insurance Expense: Delivery – Under the accrual method of
accounting, this account reports the employer's portion of the health
insurance cost incurred by the company during the period indicated in the
heading of the income statement, whether or not the company has
paid/remitted the insurance premiums within this time period. Since this
account involves the delivery function of the business, the health insurance
expense should be reported in the operating expense section of the
company's income statement.

Health Insurance Expense: Selling & Admin – Under the accrual method of
accounting, this account reports the health insurance expense that the
company has incurred for the employees in the selling and administrative
departments of the company during the period indicated in the heading of
the income statement.

Horizontal Analysis – This method involves financial statements reporting

amounts for several years. The earliest year presented is designated as the
base year and the subsequent years are expressed as a percentage of the
base year amounts.

-I-
Identify – Selecting economic events that are relevant to a particular business
transaction

Income – Increase in economic benefits during the accounting period in the

form of inflows of cash or other assets or decreases of liabilities that result in
increase in equity. Includes revenue and gains.
Income Statement – Shows the results of the company operations for a
specific period of time

Indirect Approach – The operating cash flow section of the CFS under the
indirect method adjust the accrual basis net income to net cash, provided by
the operating activities. Provides information regarding non-cash
transactions.

Information System – Storehouse of information; Collects processes and

communicates financial information of any entity

Initial Investment – The very first investment of the owner to the company

Intangible Asset – Nonphysical assets (Examples: patents, trademarks,

copyrights, goodwill and brand recognition)

Interest – A fee for borrowing an asset from a lender

Interest Expense – Is the cost incurred by a company for the use of another
firm’s resources typically in the form of a loan

Internal Auditing – Deals with determining the operational efficiency of the

company regarding the protection of the company's assets accuracy and
reliability of the accounting data and adherence to certain management
policies

Internal Auditing – Determining the operational efficiency of the company

regarding the protection of the company regarding the protection of the
company’s assets, accuracy and reliability of the accounting data and
adherence to certain management policies

Internal Users – Individuals inside the company who plan, organize and run
the business (Examples: Managers, employees, CEO)

Inventories – All items that are ready to sold. Includes raw materials, work in
process and supplies

Inflows – Money received by an organization as a result of its operating

activities, investment activities, and financing activities

Inventory Investing – Cash transactions related to purchase or sale of non-

current assets.
Inventory Turnover – Measured based on cost of goods sold and NOT sales.
Indicates how fast the company can sell inventory (alternative to inventory
turnover is "days in inventory" FORMULA: Inventory turnover = Cost of goods
sold / average

Invoice – A record of a sale or shipment made by a vendor to a customer that

typically lists the customer’s name, items sold or shipped, sales price, and
terms of the sale

-J-
Journal – Is a chronological record(day-to-day) of business transactions

Journal Entry – Is the method used to record all individual financial

transactions made by a company into its journal

Journalizing – Process of recording a transaction.

K
Known Liability – Are debts that a company has little uncertainty about

L
Ledger – A written or computerized record of all the transactions a business
has completed. Also called as book of final entry.

Leverage – Is the use of debt by a company to fund its operations and

expansion projects in an effort to generate a return for shareholders.

Liabilities – A debt owed from one company to a person or company that is

not an owner of business (Examples: Accounts Payable, Accrued Expenses,
Wages Payable)

Liquid Assets – Resources used by all market participants that can be easily
converted into cash without losing their value

Liquidity – Refers to the availability of cash or cash equivalents to meet short-

term operating needs

Long-Term Assets – Also called noncurrent assets, are resources that have a
useful life of longer than one accounting period and are not intended to be
converted into cash quickly, less than a year, to fund the current business
operations

Long-Term Investments – Are non-current assets that are not used in

operating activities to generate revenues

-M-
Management Accounting – Also called managerial accounting or cost
accounting, is the process of analyzing business costs and operations to
prepare internal financial report, records, and account to aid managers’
decision making process in achieving business goals

Manufacturer – A company that uses raw materials and employee labor

hours to create finished products

Manufacturing Business – any business that uses raw materials, parts and
components to assemble finished goods

Matching Principle – An accounting principle that requires expenses to be

reported in the same period as the revenues resulting from those expenses

Merchandise – Often called inventory, is a good or product that a retailer

purchases and intends to sell for a profit

Merchandise Inventory – Is goods that a company purchases and plans to

resell to customers at a higher price

Merchandiser – A business that purchases inventory and resells it to

customers for a profit (Example: Retailers, Wholesalers)

Merchandising – Is the marketing and promotion of a product, good, or

service within a distribution chain

Monetary Unit Principle – States that you only record business transactions
that can be expressed in terms of a currency

Mortgage Payable – Is the liability of a property owner to pay a loan that is

secured by property
 -N-
Net Assets – Are more commonly referred to as equity. This is the amount of
retained earnings that are left in the business

Net Income – Also called income, earnings, or net profit; refers to a

company’s financial position when total revenues exceed total expenses

Net Loss – Also called loss, refers to a company’s financial position when total
expenses exceed total revenues

NGAS – New Government Accounting System

NIRC – National Internal Revenue Code

Nominal Account – Accounts that report revenues, expenses, gains, and

losses

Non Trade Receivables – Are amounts due for payment to an entity other
than its normal customer invoices for merchandise shipped or services
performed

Non-Current Assets – Are company long-term investments where the full

value will not be realized within the accounting year (Examples: Patents,
intellectual property)

Nonprofit Organizations – Also called not for profit organizations, are

privately held entities that don’t provide financial benefits for their members
or stakeholders

Non-sufficient Funds (NSF) – More commonly referred to as a NSF check or

hot check, is a check that was written on a bank account without enough
money to pay the check

Note Payable – A liability in writing that promises to pay a specific amount of

money at future date or on demand

Note Receivable – Is a written promise to receive a specific amount of money

at a designated future date or on demand of the holder
 -O-
Objectivity Principle – States that financial and accounting information needs
to be independent and free from bias

Operating Cycle – Is the average period of time required for a business to

make an initial outlay of cash to produce goods, sell the goods, and receive
cash from customers in exchange for the goods.

Operating Cycle of a Manufacturing Business

 Operating Cycle of a Merchandising Business

Operating Expense (OPEX) – Are costs not directly associated with the
production of the goods or services but commonly incurred during regular
business activities

Outflows – The process of taking money out of an account as a transfer to

another account or to pay for a product or service

Operating Income – Determined by subtracting operating expenses from

operating revenue interest and income tax expenses are not included

Other income – Non-recurring income/interest

Owner’s Capital – Also called owner’s equity, is the equity account that
shows the owners’ stake in the business

Owner’s Equity – Often called net assets, is the owners’ claim to company
assets after all of the liabilities have been paid off
Owner’s Investment – Also called owner’s investment or contributed capital,
is the amount of assets that the owner puts into the company

Owner’s Withdrawal – Sometimes called a distribution, is a payment of cash

or assets from a partnership or sole proprietorship to one of its owners

-P-
Partnership – An unincorporated business entity formed by two or more
people (Examples: Warner Bros., Jollibee, Pizza Hut)

PAS – Philippine Accounting Standards

Patent – Government authority or license conferring a right or title for a set

period, especially the sole right to exclude others from making, using, or
selling an invention

PD – Presidential Decree

Periodic Inventory System – Records inventory purchases at specific time

intervals and doesn’t keep a continuous, real time record of inventory in
stock or goods sold to customers

Permanent Accounts – Also called a real account, is a balance sheet account

that is used to record activities that relate to future periods

Perpetual Inventory System – A method of tracking and recording inventory

and costs of goods sold on a continual basis, so a current inventory balance
can be calculated in real time

Petty Cash Fund – Coins, currency and replenishment checks for petty/small
payments that cannot be conveniently made with checks.

PFRS – Philippine Financial Reporting Standards

Post Journal Entries – Is the process of transferring recorded business

events from the general journal to the ledger

Post-Closing Trial Balance – A list of permanent accounts and their balances

after closing entries have been journalized and recorded in the accounting
system

Posting – Refers to the recording of ledger entries

Prepaid Expense – The prepayment of services before they are received

Prepayment – Is the sum paid for goods or services before their receipt or
invoiced due date

Principles – Indicate how transactions and other economic events should be

recorded. It refers to a doctrine, which is the basis of all other rules,
procedures and methods used in the accounting process

Profit – Also called net income, is the amount of earnings that exceed
expenses for the period; revenue minus expense

Promissory Note – A written agreement to pay a specific amount to specific

party at a future date or on demand

Property, Plant and Equipment – Also known as tangible fixed assets,

represents the non-current, physical, illiquid assets that are expected to
generate long-term economic benefits for a firm including land, buildings,
and machinery

Proprietor – An individual who owns a business establishment or sole

proprietorship

Proprietorship – Often called a sole prop, is a form of business that is owned

by a single person and not incorporated

Purchase – Means to take possession of a given asset, property, item or right

by paying a predetermined amount of money for the transaction to be
completed successfully

Purchase Discount – Also called a cash discount, is a reduction in the price of

a good if the buyer pays for it within the allowable period

Purchase Order – A source document used by the purchasing department to

place an order with a vendor or supplier

Purchases Journal – A record of all acquisitions made on credit during a

period

-Q-
Quick Assets – Are assets that can be used up or realized (turned into cash) in
less than one year or operating cycle
 -R-
Ratio Analysis – Express the relationship among selected item for financial
statement data

Real Account – A permanent account in the general journal that does not
close at the end of a period

Recording – Chronological diary of events that are measured in pesos

Recording – Keeping a chronological diary of events

Recordkeeping – The process of recording transactions and events in an

accounting system

Rent Expenses – An account that lists the cost of occupying rental property
during a reporting period

Report Form – Balance sheet that presents asset, liability, and equity
accounts in a vertical format
Retailing – When goods are sold in small quantities

Revenue – It is the increase in resources resulting from performance of

service or selling of goods

Revenue Recognition – Determines the specific conditions in

which revenue is recognized or accounted for.

Rules of Debit and Credit – First: Debit what comes in, Credit what goes out.
Second: Debit all expenses and losses, Credit all incomes and gains.
Third: Debit the receiver, Credit the giver

-S-
Sales – The total amount of revenue that the company was able to generate
from selling products

Sales Discount – This is where discounts given to customers who pay early
are recorded or cash discount

Sales Journal – Is used in recording several sales transactions on account

Sales Return – Merchandise that was returned to the seller by a customer

Securities – Are negotiable financial instruments issued by a company or

government that give ownership rights, debt rights, or rights to buy, sell, or
trade an option
Semi-Annual – Is the time interval or frequency of an event occurring every
six months, twice a year, or semi annually

Service Activity – Any activity a company engages in which provides

a service to individuals

Service Company – Is a business that generates income by providing services

instead of selling physical products

Shareholders – Often called stockholders, are the owners of a corporation

Short Term Investment – Also called a temporary investment or marketable

security, is a debt or equity security that is expected to be sold or converted
into cash in the next 3 to 12 months

Simple Entry – Involved only two accounts, one debit and one credit

Single Step – Is a financial statement format that lists all expenses including
cost of goods sold in one column

Sole Proprietorship – A form of business owned by one person. It is the

simplest and the most common form of business organization.

Source Document – Official receipts issued by the business

Special Journal – Any accounting journal in the general journal that is used to
record and post transactions of similar types

Special Purpose Financial Statements – To accommodate the information

needs of internal users

Statement of Cash Flow – Also called the cash flow statement, is a financial
statement that reports lists the inflows and outflows of cash during an
accounting period
Statement of Owner’s Equity – A financial statement that reports the
changes in the equity section of the balance sheet during an accounting
period

Subsidiary Ledger – A list of individual accounts that record transactions with

common characteristics linked to a controlling account
Supplies – Items purchased by an enterprise which are unused as of the
reporting date

-T-
T-Account – A tool that is used to help understand individual ledger accounts
and the effects of each transaction; It is in a shape of T

Tangible Assets – Asset that has a physical form

Tax Accounting – Helps clients follow rules set by tax authorities. It includes
tax planning and preposition of tax return.

Tax Payable – Is a liability account that represents the payroll, sales and
other taxes that you owe but for which you have not issued payment

Taxing Authorities – Determine credibility of tax returns filed

Time Period Principle – They have specific time or period for financial
statement; A financial accounting principle that assumes all companies and
organizations can divide activities into time periods

Total Cost – An economic measure that sums all expenses paid to produce a
product, purchase an investment, or acquire a piece of equipment including
not only the initial cash outlay but also the opportunity cost of their choices

Trade Receivable – Are amounts billed by a business to its customers when it

delivers goods or services to them in the ordinary course of business

Trading Merchandising – Buying of goods at wholesale and selling at retail

Transaction – Also called a business event, is any exchange of economic
consideration that can be reasonably measured and affects the firm’s
financial position

Trial Balance – A device used to test periodically the equality of debit and
credit as recorded in the general ledger account

-U-
Unadjusted Trial Balance – Listing of the chart of accounts with their current
balances

Underlying Asset – The security of a derivative contract. This could be a

stock, bond, or other financial instrument that gives a derivative value.

Unearned Income – Occurs when a company receives money before the

money is earned. This is also referred to as deferred revenues or customer
deposit

Unearned Revenue – Also called deferred revenue, is the liability or amount

of money owed for payment of goods or services by a customer before the
goods or services have been delivered to that customer

Unlimited Liability – Refers to the legal obligations general partners and sole
proprietors because they are liable for all business debts if the business can’t
pay its liabilities
Utilities expense – Is the cost consumed in a reporting period, the cost of
using a facility or utility

-V-
Venture capital – Refers to the financing of a startup company

Vertical Analysis – Also called common-size analysis, is a financial analysis tool

that lists each line item on the financial statements as a percentage of its
total category; It’s a method used to analyze financial statements by
comparing individual entries as a proportion of their total accounts like
assets, liabilities, and equity.

Voucher – A file or folder that companies use to store documents that are
used for cash distribution authorization like checks, invoice approvals,
receiving reports, invoices, purchase orders, and purchase requests.

-W-
Wage expense – The compensation earned by hourly-paid employees during
the interval of time

Wage payable – Is a current liability account that records the amount of

wages that are owed to employees

Wages – Is compensation paid to employees for work for a company during a

period of time

Wholesale – When goods are sold in big quantities or volume

Withdrawals – Or owner withdrawals are payments from an owner’s share in

a company

Working Capital – Also called net working capital, is a liquidity ratio that
measures a company’s ability to pay off its current liabilities with its current
assets

Worksheets – Are prepared at the end of an accounting period and usually

include a list of accounts, account balances, adjustments to each account,
and each account’s adjusted balance all sorted in financial statement order
 -X-
X-Inefficiency – Is the failure to minimize costs or maximize returns.

-Y-
Year-End – Is the of an accounting period; usually a calendar year but may be
a fiscal year.

Year-End Adjustment – Is the process of adjusting the entry to an account at

the end of calendar.

-Z-
Zero Rates Sales – Is when a sale is taxable at the rate of 0%.