-
Accounting cycle
- The sequence of steps that occurs in the recording and reporting of events
- in the accounting system.
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Accumulated amortization
- The total amount of amortization that has been taken on an asset, to a
- particular point in time.
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Accumulated other comprehensive income
- A component of shareholders' equity representing the cumulative
- amount of unrealized increases and decreases in the values of the net assets of
- an enterprise. Once realized, these gains and losses are transferred to retained
- earnings.
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Adjusted trial balance
- A listing of the account balances after the adjusting entries have been
- made, but before the closing entries have been made.
-
Adjusting entry
- An entry made at the end of the period to record an event or transaction
- that has not been recorded during the accounting period. Events or transactions
- that are not signalled in any other way are recorded through adjusting entries.
-
Chart of accounts
A listing of the names of the accounts used in a particular accounting system.
-
Classified balance sheet
- A balance sheet in which the assets and liabilities sections are subdivided
- into current (or short-term) and noncurrent (or long-term) items.
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Closing the books
- The process by which a company makes closing entries to complete one
- accounting period and set the balances in the temporary accounts to zero, in
- preparation for the next period. The temporary accounts are closed into the
- retained earnings account.
-
Closing entries
- Entries made at the end of the accounting period to transfer the balances
- from the temporary income statement and dividend accounts to the retained
- earnings account.
-
Compound entry
- A journal entry with more than two parts (i.e., multiple debits and/or
- multiple credits). Of course, as with any journal entry, the total amount
- debited must equal the total amount credited.
-
Comprehensive income
- The total change in the shareholders' equity (or net assets) of the
- enterprise from nonowner sources. Includes net income as well as other
- components, which generally represent unrealized gains and losses.
-
Contra asset account
- An account used to record reductions in a related asset account. An example
- is accumulated amortization.
-
Credit
- A reference to the right side of an account, or an entry made to the right
- side of an account.
-
Debit
- A reference to the left side of an account, or an entry made to the left
- side of an account.
-
Diluted earnings per share
- An earnings per share calculation that shows what a company's basic earnings
- per share could have been reduced to, if financial instruments such as
- convertible debt or obligations such as employee stock options had caused more
- common shares to be issued.
-
Discontinued operations
- Business operations that have been (or are being) phased out and will,
- therefore, not continue in the future. They are reported separately on the
- income statement.
-
Double-entry accounting system
- An accounting system that maintains the equality of the balance sheet
- equation. Each entry requires that equal amounts of debits and credits be made.
-
Earnings per share
- A calculation in which income or earnings are divided by the
- average number of common shares outstanding during the period.
-
Extraordinary item
- A gain or loss that meets three criteria: (1) it is unusual, (2) it is
- infrequent, and (3) it is not caused primarily by a decision made by someone
- inside the company. It is reported separately on the income statement.
-
Future income tax
- An asset or liability representing tax on the difference between the
- accounting balance of assets/liabilities at a given point in time and the tax
- balance of the same assets/liabilities. These differences arise when the
- company uses one method for accounting purposes and a different method for tax
- purposes.
-
Gross margin
Sales minus cost of goods sold. Synonym for gross profit.
-
Gross profit
Sales minus cost of goods sold. Synonym for gross margin.
-
Income summary account
- An account that is often used when closing the books, to summarize all the
- temporary income statement accounts prior to their being closed to retained earnings.
-
Income tax expense
The expense for income taxes. A synonym for provision for taxes.
-
Journal
- A place where transactions and events are originally recorded in the
- accounting system, in chronological order.
-
Journal entry
An entry made in a journal, to record a transaction or event.
-
Ledger
- A place where transactions and events are summarized in accounts. Entries
- are transferred from the journal to the ledger by a process known as posting.
-
Liquidity
- A quality of an asset that describes how quickly it can be converted into
- cash.
-
Multi-step income statement
- An income statement in which revenues and expenses from different types of
- sources are shown in separate sections of the statement.
-
Net-of-tax basis
- The presentation of a gain or loss with the related income tax deducted from
- it, to show the remaining amount, after tax.
-
Other comprehensive income
- Changes in net asset values representing unrealized gains and losses, which
- are not included in net income but are included in comprehensive income.
-
Permanent accounts
- Accounts whose balances carry over from one period to the next. All balance
- sheet accounts are permanent accounts.
-
Post-closing trial balance
- A trial balance prepared after the closing entries have been journalized and
- posted to the accounts. Since all the temporary accounts have zero balances at
- this point, it usually lists only the permanent accounts (whose balances are
- carried forward into the next period).
-
Posting the accounts
- The process of transferring the information recorded in journal entries to
- the ledger accounts. A synonym for posting to the ledger.
-
Posting to the ledger
- The process of transferring the information recorded in journal entries to
- the ledger accounts. A synonym for posting the accounts.
-
Provision for taxes
The expense for income taxes. A synonym for income tax expense.
-
Rules of debit and credit
- For asset accounts, increases are recorded with debits and decreases with
- credits; for liability and shareholders' equity accounts, increases are
- recorded with credits and decreases with debits.
-
Single-step income statement
- An income statement in which all revenues are listed in one section and all
- expenses (except income taxes, perhaps) are listed in a second section.
-
Statement of comprehensive income
- A statement showing net income plus other components of comprehensive
- income, combined to produce the total comprehensive income.
-
Synoptic journal
- A journal in which transactions are recorded in a spreadsheet format. Each
- account is assigned its own column, and amounts are added or subtracted inside
- the columns.
-
T account
A device used to represent a ledger account in simplified form.
-
Temporary accounts
- Accounts used to keep track of information temporarily, during an accounting
- period. Balances in these accounts are eventually transferred to a permanent
- account, at the end of the period, using closing entries.
-
Transaction analysis
- The process by which an accountant decides what accounts are affected, and
- by how much, by an economic transaction or event.
-
Trial balance
A listing of all the ledger account balances.
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