Accounting Vocabulary

  1. Absolute Amounts
    Dollar totals reported in accounts on financial reports that can be misleading because they make no reference to the relative size of the company being analyzed
  2. Accelerated Depreciation Method
    Depreciation method that recognizes more depreciation expense in the early stages of an assets's life than the straight-line method and less later in the asset's life
  3. Account
    Record of classified and summarized transaction data; component of financial statement elements
  4. Account Balance
    Difference between total debit and total credit amounts in an account
  5. Accounting
    Service based profession developed to provide reliable and relevant financial information useful in making decisions
  6. Accounting Controls
    Procedures companies implement to safeguard assets and to ensure accurate and reliable accounting records and reports
  7. Accounting Equation
    Algebraic relationship between a company's assets and the claims on those assets, represented as Assets = Liabilities + Equity
  8. Accounting Cycle
    for a given time period, the cycle of recording accounting data, adjusting the accounts, preparing the financial statements, and closing the temporary accounts; when one accounting cycle ends; a new one begins
  9. Accounting Event
    Economic occurrence that changes a company assets, liabilities, or equity
  10. Accounting Period
    Time span covered by the financial statements; normally one year, but may be a quarter, a month or some other time interval
  11. Accounts Payable
    A liability account that represents the business's obligation to pay cash for operating expenses sometime in the future
  12. Accounts Receivable
    Expected future cash receipts arising form permitting customers to buy now and pay later; typically relatively small balances due within  short time period
  13. Accounts Receivable Turnover
    Financial ratio that measures how fast accounts receivable are collected in cash; computed by dividing sales by accounts receivable
  14. Accrual
    Accounting recognition of revenue or expense in a period before cash is exchanged
  15. Accrual Accounting
    Accounting system which recognizes revenues when earned and expenses when incurred regardless of when the related cash is exchanged
  16. Accumulated Depreciation
    Contra asset account that shows the sum of all depreciation expense recognized for an asset since the date of acquisition
  17. Accrued Expenses
    Expenses that are recognized before cash is paid. An example is accrued salaries expense
  18. Accrued Interest
    Interest revenue or expense that is recognized before cash has been exchanged
  19. Acid-Test Ratio
    Measure of immediate debt-paying ability; calculated by dividing very liquid assets (cash, receivables, and marketable securities) by current liabilities
  20. Adjusting Entry
    Entry that updates account balances prior to preparing financial statements; a bookkeeping tool. Adjusting entries never affect the Cash account
  21. Administrative Controls
    Procedures companies implement to evaluate performance and monitor compliance with company policies and public laws
  22. Adverse Opinion
    Opinion issued by a certified public accountant that means one or more departures from GAAP in a company's financial statements are so very material the auditors believe the financial statements do not fairly represent the company's status; contrast with unqualified opinion
  23. Aging of Accounts Receivable
    Classifying each account receivable by the number of days it has been outstanding.  The purpose of the aging schedule is to develop a more accurate estimate of the amount of uncollectible accounts.
  24. Allocation
    Recognizing expense by systemically assigning the cost of an asset to periods of use.
  25. Allowance for Doubtful Accounts
    Contra asset account used to record the amount of accounts receivable estimated to be uncollectible
  26. Allowance Method of Accounting for Uncollectible Accounts
    An accounting practice that recognizes an estimated rather than the actual amount of uncollectible accounts expense.  Estimated expenses are used to improve matching of revenues and expenses and/or to more accurately reflect the net realizable value of  accounts receivable.
  27. Allowances
    Reductions in the selling price of goods extended to buyers because the goods are defective or of lower quality than the buyer ordered to encourage a buyer to keep merchandise that would otherwise be returned
  28. American Institute or Certified Public Accountants (AICPA)
    National association that serves the educational and professional interests of members of the public accounting profession; membership is voluntary.
  29. Amortization
    • -Systematic and periodic allocation of the costs of intangible assets to expense over their useful lives
    • -Periodically transferring the discount on a note or a bond to interest expense
  30. Amortizing
    Systemically allocating the cost of intangible assets to expense over their useful lives; also a term for converting the discount o to or a bond to interest expense over a designated period
  31. Annual Report
    Document companies publish to provide information, including financial statements, to stockholders
  32. Annuity
    Series of equal cash flows received or paid over equal time intervals at a constant rate of return
  33. Appropriated Retained Earnings
    Retained earnings restricted by the board of directors for a specific purpose (ex. to repay debt or for future expansion); part of total retained earnings, but not available for distribution as dividends
  34. Articles of Incorporation
    Information about a proposed corporation, such as its name, purpose, location, expected life, proposed capital stock, and a list of the members of its board of directors, filed with a state agency when applying for the legal formation of the corporation
  35. Articulation
    Characteristic of financial statements that means they are interrelated.  For example, the amount of net income reported on the income statements is added to beginning retained earnings as a component in calculating the ending retained earnings balance reported on the statement of changes in stockholders' equity.
  36. Asset
    Economic resource used to produce revenue which is expected to provide future benefit to the business
  37. Asset Exchange Transaction
    A transaction , such as the purchase of and with cash, that deceases one asset and increases another asset; total assets remain unchanged
  38. Asset Source Transaction
    A transaction that increases both an asset and a claim on assets; the three types of asset source transactions are acquisitions from owners (equity), borrowings from creditors (liabilities), or earnings from operations (revenues)
  39. Audit
    Detailed examination of some aspect of a company's accounting records or operating procedures in order to report the results to interested parties.
  40. Authority Manual
    Written documentation outlining levels of authority and responsibility.  The authority manual provides specific guidelines such as those for a personnel officer as well as general guidelines such as giving all vice presidents authorization to approve up to a designated spending limit.
  41. Authorized Stock
    Number of shares of stock a corporation has state approval to issue
  42. Available-for-Sale Securities
    Classification for marketable securities that are not considered held-to-maturity or trading securities
  43. Average Days to Collect Accounts Receivable
    Measure of how quickly, on average, a business collects its accounts receivable; calculated as 365 divided by the accounts receivable turnover
Card Set
Accounting Vocabulary