ALL VOCABULARY

Check

A business form ordering a bank to pay cash from a bank account.

Employee earnings record

A business form used to record details of an employee's earnings and deductions.

Vendor

A business from which merchandise, supplies, or other assets are purchased.

Partnership

A business in which two or more persons combine their assets and skills.

Proprietorship

A business owned by one person.

Source document

A business paper from which information is obtained for a journal entry.

Wholesale merchandising business

A business that buys and resells merchandise primarily to other merchandising businesses.

Service business

A business that performs an activity for a fee.

Merchandising business

A business that purchases and resells goods.

Sales discount

A cash discount on a sale taken by the customer.

Non-sufficient funds check

A check dishonored by the bank because of insufficient funds in the account of the maker of the check.

Dishonored check

A check that a bank refuses to pay.

Voided check

A check that cannot be processed because the maker has made it invalid.

Voucher check

A check which has a detachable check stub, or voucher, that contains detailed information about the cash payment.

Canceled check

A check which has been paid by the bank.

Postdated check

A check with a future date on it.

Preferred stock

A class of stock that gives preferred shareholders preference over common shareholders in dividends along with other rights.

Work sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

Financial ratio

A comparison between two components of financial information.

Horizontal analysis

A comparison of one item on a financial statement with the same item on a previous period's financial statement.

Electronic funds transfer

A computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents.

Double declining-balance method of depreciation

A declining-balance rate that is two times the straight-line rate.

Loss

A decrease in equity resulting from activity other than selling goods or services.

Withholding allowance

A deduction from total earnings for each person legally supported by a taxpayer, including the employee.

Cash discount

A deduction that a vendor allows on an invoice amount to encourage prompt payment.

Time clock

A device used to record the dates and times of every employee's arrivals and departures.

Contract of sale

A document that details all the terms agreed to by seller and buyer for a sales transaction.

Sight draft

A draft payable on sight when the holder presents it for payment.

Time draft

A draft that is payable at a fixed or determinable future time after it is accepted.

Federal unemployment tax

A federal tax paid by employers to administer the unemployment program.

Medicare tax

A federal tax paid for hospital insurance.

Social security tax

A federal tax paid for old-age, survivors, and disability insurance.

Stock ledger

A file of stock records for all merchandise on hand.

Number of days' sales in inventory

A financial ratio determined by dividing 365 days by the inventory turnover ratio.

Inventory turnover ratio

A financial ratio that evaluates the amount of inventory available for sale.

Budget

A financial road map used by individuals and companies as a guide for spending and saving.

Income statement

A financial statement showing the revenue and expenses for a fiscal period.

Balance sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

Statement of stockholders' equity

A financial statement that shows changes in a corporation's ownership for a fiscal period.

Statement of cash flows

A financial statement that summarizes cash receipts and cash payments resulting from business activities during a fiscal period.

Owners' equity statement

A financial statement that summarizes the changes in owners' equity during a fiscal period.

Fiscal year

A fiscal period consisting of 12 consecutive months.

Salary

A fixed annual sum of money divided among equal pay periods.

Invoice

A form describing the goods or services sold, the quantity, the price, and the terms of sale.

Journal

A form for recording transactions in chronological order.

Memorandum

A form on which a brief message is written to describe a transaction.

Debit memorandum

A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance.

Credit memorandum

A form prepared by the vendor showing the amount deducted for returns and allowances.

Purchase order

A form requesting that a vendor sell merchandise to a business.

Requisition

A form requesting the purchase of merchandise.

Petty cash slip

A form showing proof of a petty cash payment.

Trade acceptance

A form signed by a buyer at the time of a sale of merchandise in which the buyer promises to pay the seller a specified sum of money, usually at a stated time in the future.

Inventory record

A form used during a physical inventory to record information about each item of merchandise on hand.

Stock record

A form used to show the kind of merchandise, quantity received, quantity sold, and balance on hand.

Net worth statement

A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

Business plan

A formal written document that describes the nature of a business and how it will operate.

Ledger

A group of accounts.

Board of directors

A group of persons elected by the stockholders to govern a corporation.

Special amount column

A journal amount column headed with an account title.

General amount column

A journal amount column that is not headed with an account title.

Special journal

A journal used to record only one kind of transaction.

General journal

A journal with two amount columns in which all kinds of entries can be recorded.

General ledger

A ledger that contains all accounts needed to prepare financial statements.

Subsidiary ledger

A ledger that is summarized in a single general ledger account. Accountants often refer to a subsidiary ledger as a subledger.

Articles of incorporation

A legal document that identifies basic characteristics of a corporation, which is a part of the application submitted to a state to become a corporation.

Letter of credit

A letter issued by a bank guaranteeing that a named individual or business will be paid a specified amount provided stated conditions are met.

Chart of accounts

A list of accounts used by a business.

Inventory

A list of assets, usually containing the value of individual items.

Schedule of accounts receivable

A listing of customer accounts, account balances, and total amount due from all customers.

Schedule of accounts payable

A listing of vendor accounts, account balances, and the total amount due to all vendors. Some businesses call this listing an accounts payable trial balance.

Bond

A long-term promise to pay a specified amount on a specified date and to pay interest at stated intervals.

Depreciation

A loss in the usefulness of a plant asset as a result of wear or obsolescence.

Periodic inventory

A merchandise inventory evaluated at the end of a fiscal period.

Retail merchandising business

A merchandising business that sells to those who use or consume the goods.

Commission

A method of paying an employee based on the amount of sales the employee generates. Commissions are normally calculated as a percent of an employee's sales.

Percent of accounts receivable method

A method that uses an analysis of accounts receivable to estimate the amount that will be uncollectible.

Percent of sales method

A method used to estimate uncollectible accounts receivable which assumes that a percentage of each sales dollar will eventually become uncollectible.

Underwater mortgage

A mortgage that has a balance higher than the value of the mortgaged property.

Deficit

A negative balance that remains after total expenses are subtracted from total income.

Dishonored note

A note that is not paid when due.

Audit trail

A paper or electronic path that provides a documented history of a transaction.

Distribution of net income statement

A partnership financial statement showing net income or loss distribution to partners.

Physical inventory

A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand.

Creditor

A person or business to whom a liability is owed.

Cash short

A petty cash on hand amount that is less than the recorded amount.

Cash over

A petty cash on hand amount that is more than the recorded amount.

Accounting system

A planned process designed to compile financial data and summarize the results in accounting records and reports.

Surplus

A positive balance that remains after total expenses are subtracted from total income.

Wage garnishment

A process that requires an employer to withhold a portion of an employee's paycheck to pay a court-ordered debt settlement.

Note payable

A promissory note signed by a business and given to a creditor.

Note receivable

A promissory note that a business accepts from a person or business.

Trial balance

A proof of the equality of debits and credits in a general ledger.

401(k)

A qualified retirement plan sponsored by an employer.

Roth individual retirement account (Roth IRA)

A qualified retirement plan that allows tax-free withdrawals from the account.

Individual retirement account (IRA)

A qualified retirement plan that provides most individuals with a deferred federal income tax benefit.

Market ratio

A ratio that measures a corporation's financial performance in relation to the market value of its stock.

Profitability ratio

A ratio that measures the ability of a business to generate income.

Liquidity ratio

A ratio that measures the ability of a business to pay its current financial obligations.

Solvency ratio

A ratio that measures the ability of a business to pay its long-term liabilities.

Current ratio

A ratio that measures the relationship of current assets to current liabilities.

Quick ratio

A ratio that measures the relationship of quick assets to current liabilities.

Bill of lading

A receipt signed by the authorized agent of a transportation company for merchandise received that also serves as a contract for the delivery of the merchandise.

Account

A record that summarizes all the transactions pertaining to a single item in the accounting equation.

Trade discount

A reduction in the list price granted to a merchandising business.

Batch report

A report of credit card sales produced by a point-of-sale terminal.

Bank statement

A report of deposits, withdrawals, and bank balances sent to a depositor by a bank.

Supporting schedule

A report prepared to give details about an item on a principal financial statement.

Qualified retirement plan

A retirement savings plan approved by the Internal Revenue Service that provides individuals with a tax benefit. See also 401(k), individual retirement account, Roth IRA.

Franchise

A right granted to an individual or business to sell the products or services of another, larger business within a defined geographical area.

Sale on account

A sale for which payment will be received at a later date.

Cash sale

A sale in which the customer pays for the total amount of the sale at the time of the transaction.

Endorsement

A signature or stamp on the back of a check transferring ownership.

Cash payments journal

A special journal used to record only cash payment transactions.

Cash receipts journal

A special journal used to record only cash receipt transactions.

Purchases journal

A special journal used to record only purchases of merchandise on account.

Sales journal

A special journal used to record only sales of merchandise on account.

Point-of-sale (POS) terminal

A specialized computer used to collect, store, and report all the information about a sales transaction.

Benchmark

A standard used to compare financial performance.

Charter

A state approves the formation of a corporation by issuing a charter, the legal right for a business to conduct operations as a corporation.

State unemployment tax

A state tax paid by employers that is used to pay benefits to unemployed workers.

Commercial invoice

A statement prepared by the seller of merchandise addressed to the buyer showing a detailed listing and description of merchandise sold, including prices and terms.

Accounts receivable ledger

A subsidiary ledger containing all accounts for charge customers.

Sales tax

A tax on a sale of merchandise or services.

Purchase on account

A transaction in which the items purchased are to be paid for later.

Adjusted trial balance

A trial balance prepared after adjusting entries are posted.

Post-closing trial balance

A trial balance prepared after the closing entries are posted.

Unadjusted trial balance

A trial balance prepared before adjusting entries are posted.

Declining-balance method of depreciation

A type of accelerated depreciation that multiples the book value of an asset by a constant depreciation rate to determine annual depreciation.

Share of stock

A unit of ownership in a corporation.

Par value

A value assigned to a share of stock and printed on the stock certificate.

Partnership agreement

A written agreement setting forth the conditions under which a partnership.

Promissory note

A written and signed promise to pay a sum of money at a specified time.

Draft

A written, signed, and dated order from one party ordering another party, usually a bank, to pay money to a third party

Uncollectible accounts

Accounts receivable that cannot be collected.

Permanent accounts

Accounts used to accumulate information from one fiscal period to the next.

Temporary accounts

Accounts used to accumulate information until it is transferred to the owner's capital account.

Declaring a dividend

Action by a board of directors to distribute corporate earnings to stockholders.

Bond issue

All bonds representing the total amount of a loan.

Factory overhead

All expenses other than direct materials and direct labor that apply to making products.

Personal property

All property not classified as real property.

Activity-based costing

Allocating factory overhead based on the level of major activities.

Accounts payable

Amounts to be paid in the future for goods or services already acquired.

Accounts receivable

Amounts to be received in the future due to the sale of goods or services.

Controlling account

An account in a general ledger that summarizes all accounts in a subsidiary ledger.

Contra account

An account that reduces a related account on a financial statement.

Capital account

An account used to summarize the owner's equity in a business.

Forensic accountant

An accountant who combines accounting and investigating skills to uncover suspected fraudulent business activity, or to prevent such activity.

Certified public accountant (CPA)

An accountant who has passed the uniform certified public accounting exam and met the licensing requirement for a state.

Public accounting firm

An accounting business that helps other businesses with accounting issues.

T account

An accounting device used to analyze transactions.

Plant asset record

An accounting form on which a business records information about each plant asset.

Payroll register

An accounting form that summarizes the earnings, deductions, and net pay of all employees for one pay period.

Accounting clerk

An accounting worker who processes routine details about accounting transactions.

Terms of sale

An agreement between a buyer and a seller about payment for merchandise.

Retained earnings

An amount earned by a corporation and not yet distributed to stockholders.

Petty cash

An amount of cash kept on hand and used for making small payments.

Liability

An amount owed.

Interest

An amount paid for the use of money for a period of time.

Debit

An amount recorded on the left side of an account.

Credit

An amount recorded on the right side of an account.

Trend analysis

An analysis of changes over time.

Intangible asset

An asset that does not have physical substance.

Blank endorsement

An endorsement consisting only of the endorser's signature.

Special endorsement

An endorsement indicating a new owner of a check.

Restrictive endorsement

An endorsement restricting further transfer of a check's ownership.

Reversing entry

An entry made at the beginning of one fiscal period to reverse an adjusting entry made in the previous fiscal period.

Accrual

An entry recording revenue before the cash is received, or an expense before the cash is paid.

Deferral

An entry recording the receipt of cash before the related revenue is earned, or payment of cash before the related expense is incurred.

Accounting equation

An equation showing the relationship among assets, liabilities, and owner's equity.

Audit

An examination of financial records, accounts, and supporting documents to check their accuracy.

Gain

An increase in equity resulting from activity other than selling goods or services.

Revenue

An increase in equity resulting from the sale of goods or services.

Gain on plant assets

An increase in equity that results when a plant asset is sold for more than book value.

Perpetual inventory

An inventory determined by keeping a continuous record of increases, decreases, and the balance on hand of each item of merchandise.

Purchase invoice

An invoice used as a source document for recording a purchase on account transaction.

Sales invoice

An invoice used as a source document for recording a sale on account. A sales invoice is also referred to as a sales ticket or a sales slip.

Corporation

An organization with the legal rights of a person which many persons or other corporations may own.

Aging of accounts receivable

Analyzing accounts receivable according to when they are due.

Payroll deduction

Any amount withheld from an employee's gross earnings.

Transaction

Any business activity that changes assets, liabilities, or owner's equity.

Accelerated depreciation

Any method of depreciation which records greater depreciation expense in the early years and less depreciation expense in the later years.

Stakeholders

Any persons or groups who will be affected by an action.

Asset

Anything of value that is owned.

Intellectual property

Anything, or any process, that is protected by patent, trademark, or copyright. See also, intangible asset.

Collateral

Assets pledged to a creditor to guarantee repayment of a loan.

Withdrawals

Assets taken from the business for the owner's personal use.

Writing off an account

Canceling the balance of a customer account because the customer does not pay.

Current assets

Cash and other assets expected to be exchanged for cash or consumed within a year.

Quick assets

Cash and other current assets that can be quickly converted into cash.

Prepaid expense

Cash paid for an expense in one fiscal period that is not used until a later period.

Investing activities

Cash receipts and cash payments involving the sale or purchase of assets used to earn revenue over a period of time.

Financing activities

Cash receipts and payments involving debt or equity transactions.

Deferred revenue

Cash received for goods or services which have not yet been provided.

Realization

Cash received from the sale of assets during liquidation of a partnership.

Adjustments

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period.

Financial statements

Financial reports that summarize the financial condition and operations of a business.

Equities

Financial rights to the assets of a business.

Interim financial statements

Financial statements providing information for a time period shorter than the fiscal year.

Comparative financial statements

Financial statements that provide information for multiple fiscal periods.

Generally accepted accounting principles

GAAP

GAAP

Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities.

Imports

Goods or services shipped into the buyer's home country from another country.

Exports

Goods or services shipped out of a seller's home country to another country.

Merchandise

Goods that a business purchases to sell.

Gross margin

Gross profit as a percent of net sales.

Financial accounting

The area of accounting which focuses on reporting information to external users.

Managerial accounting

The area of accounting which focuses on reporting information to internal users.

Capital

The assets or other financial resources available to a business.

Ratio analysis

The calculation and interpretation of a financial ratio.

Cash flow

The cash receipts and cash payments of a company.

Operating activities

The cash receipts and payments necessary to operate a business on a day-to-day basis.

Controller

The chief accountant in an organization, having responsibility for both financial and managerial accounting activities. Sometimes called comptroller.

Expense

The cost of goods or services used to operate a business.

Due date

The date by which an invoice must be paid.

Issue date

The date on which a business issues a note, bond, or stock.

Maturity date

The date on which the principal of a note is due to be repaid.

Loss on plant assets

The decrease in equity that results when a plant asset is sold for less than book value.

Book value

The difference between an asset's account balance and its related contra account balance.

Equity

The difference between assets and liabilities.

Personal net worth

The difference between personal assets and personal liabilities.

Book value of accounts receivable

The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts.

Account balance

The difference between the increases and decreases in an account.

Net loss

The difference between total revenue and total expenses when total expenses are greater.

Net income

The difference between total revenue and total expenses when total revenue is greater.

Operating expenses

The expenses incurred by a business in its normal operations.

Cost accounting

The field of accounting that identifies and measures costs.

Merchandise inventory

The goods a business has on hand for sale to customers.

Interest income

The interest earned on money loaned.

Prime interest rate

The interest rate charged to a bank's most credit-worthy customers.

Stated interest rate

The interest rate used to calculate periodic interest payments on a bond.

Fiscal period

The length of time for which a business summarizes its financial information and reports its financial performance.

Time of a note

The length of time from the signing date to the maturity date, usually expressed as the number of days.

Tax base

The maximum amount of earnings on which a tax is calculated.

Credit limit

The maximum outstanding balance allowed to a customer by a vendor.

Rollover

The movement of funds from one qualified retirement plan to another.

Account title

The name given to an account.

Account number

The number assigned to an account.

Pay period

The number of days or weeks of work covered by an employee's paycheck.

Gross profit on sales

The operating revenue remaining after cost of merchandise sold has been deducted.

Income from operations

The operating revenue remaining after the cost of merchandise sold and operating expenses have been deducted.

Principal

The original amount of a note, sometimes referred to as the face amount.

Book value of a plant asset

The original cost of a plant asset minus accumulated depreciation.

Cost of merchandise sold

The original price of all merchandise sold during a fiscal period.

Stockholder

The owner of one or more shares of stock.

Direct deposit

The payment of an employee's net pay using electronic funds transfer.

Revenue expenditure

The payment of an operating expense necessary to earn revenue.

Deposit

The payment of payroll taxes to the government.

Interest rate

The percentage of the principal that is due for the use of the funds secured by a note.

Discount period

The period of time during which a customer may take a cash discount.

Useful life

The period of time over which an asset contributes to the earnings of a business.

Maker of a note

The person or business that signs a note and thus promises to make payment.

Payee

The person or business to whom the amount of a note is payable.

Depreciation expense

The portion of a plant asset's cost that is transferred to an expense account in each fiscal period during that asset's useful life.

Net price

The price after the trade discount has been deducted from the list price.

Market value

The price that must be paid to replace an asset.

Ethics

The principles of right and wrong that guide an individual in making decisions.

File maintenance

The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current.

Liquidation of a partnership

The process of paying a partnership's liabilities and distributing remaining assets to the partners.

Accounting

The process of planning, recording, analyzing, and interpreting financial information.

Batching out

The process of preparing a batch report from a point-of-sale terminal.

Cost of capital

The ratio of interest and dividend payments to the proceeds from debt and capital financing.

Return on sales

The ratio of net income to total sales.

Return on investment

The ratio of the money earned on an investment relative to the amount of the investment.

Double-entry accounting

The recording of debit and credit parts of a transaction.

Dividend yield

The relationship between dividends per share and market price per share.

Price-earnings ratio

The relationship between the market value per share and earnings per share of a stock

Terminal summary

The report that summarizes the cash and credit card sales of a point-of-sale terminal. A terminal summary is also known as a Z tape.

List price

The retail price listed in a catalog or on an Internet site.

Operating revenue

The revenue earned by a business from its normal business operations.

Accounting cycle

The series of accounting activities included in recording financial information for a fiscal period.

Normal balance

The side of an account that is increased is called the normal balance of the account.

Amortization

The spreading of the cost of an intangible asset over its useful life.

Accounts payable ledger

The subsidiary ledger containing vendor accounts.

Total income

The sum of all sources of income reported on Form 1040.

Marginal tax rate

The tax rate associated with a tax bracket.

Payroll

The total amount earned by all employees for a pay period.

Accumulated depreciation

The total amount of depreciation expense that has been recorded since the purchase of a plant asset.

Total earnings

The total amount paid by a business for an employee's work, earned by a wage, salary, or commission.

Accumulated earnings

The total gross earnings year to date for an employee.

Salary expense

The total of gross earnings for all employees earning hourly wages, salaries, and commissions.

Capital stock

The total shares of ownership in a corporation.

Business ethics

The use of ethics in making business decisions.

Assessed value

The value of an asset determined by tax authorities for the purpose of calculating taxes.

Report form of the balance sheet

A balance sheet form listing asset, liability, and equity accounts in a single column, one after the other.

Account form of the balance sheet

A balance sheet form showing assets on the left and liabilities and equity on the right.

Checking account

A bank account from which payments can be ordered by a depositor.

Debit card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder.

Deposit slip

A bank form which lists the checks, currency, and coins an account holder is adding to a bank account.

Line of credit

A bank loan agreement that provides immediate short-term access to cash.

Pay yourself first

A budgeting strategy of setting aside at least 10% of after-tax income for saving and investing.

Receipt

A business form giving written acknowledgement for cash received.

Purchases allowance

Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer's account.

Purchases return

Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer's account.

Sales allowance

Credit allowed to a customer for part of the sales price of merchandise that is not returned, resulting in a decrease in the accounts receivable of the merchandising business.

Sales return

Credit allowed to a customer for the sales price of returned merchandise, resulting in a decrease in the accounts receivable of the merchandising business.

Allowance method

Crediting the estimated value of uncollectible accounts to a contra account.

Proving cash

Determining that the amount of cash agrees with the balance of the cash account in the accounting records.

Partner

Each member of a partnership.

Tax bracket

Each tax rate and taxable income amount on one line of a tax table.

Dividends

Earnings distributed to stockholders.

Net pay

Earnings paid to an employee after payroll taxes and other deductions.

Gross profit method of estimating inventory

Estimating inventory by using the previous year's percentage of gross profit on operations.

Accrued expenses

Expenses incurred in one fiscal period, but not paid until a later fiscal period.

Non-operating expense

Expenses that are not related to a business' normal operations.

Correcting entry

If a transaction has been improperly journalized and posted to the ledger, the incorrect journal entry should be corrected with an additional journal entry, called a correcting entry.

Operating margin

Income from operations as a percent of net sales.

Entry

Information for each transaction recorded in a journal.

Interest expense

Interest accrued on borrowed funds.

Accrued interest income

Interest earned but not yet received.

Accrued interest expense

Interest incurred but not yet paid.

Compound interest

Interest paid on an original amount deposited in a bank plus any interest that has been paid.

Adjusting entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period.

Closing entries

Journal entries used to prepare temporary accounts for a new fiscal period.

Real property

Land and anything attached to the land.

Current liabilities

Liabilities due within a short time, usually within a year.

Long-term liabilities

Liabilities owed for more than a year.

Profit margin

Net income after federal income tax as a percent of net sales.

Earnings per share

Net income after federal income tax divided by the number of outstanding shares of stock.

Defaulting

Not making payments on a loan when they are due.

Debt financing

Obtaining capital by borrowing money for a period of time.

Deferred expenses

Payments for goods or services which have not yet been received.

Plant assets

Physical assets that will be used for a number of years in the operation of a business.

Internal controls

Processes and procedures employed within a business to ensure that its operations are conducted ethically, accurately, and reliably.

Capital expenditures

Purchases of plant assets used in the operation of a business.

Straight-line method of depreciation

Recording an equal amount of depreciation expense for a plant asset in each year of its useful life.

Journalizing

Recording transactions in a journal.

Direct write-off method

Recording uncollectible accounts expense only when an amount is actually known to be uncollectible.

Vertical analysis

Reporting an amount on a financial statement as a percentage of another item on the same financial statement.

Accrual basis of accounting

Reporting income when earned and expenses when incurred.

Cash basis of accounting

Reporting income when the cash is received and expenses when the cash is paid.

Accrued revenue

Revenue earned in one fiscal period but not received until a later fiscal period.

Accounts payable trial balance

See schedule of accounts payable.

Entrepreneur

Someone who owns, operates, and takes the risk of a business venture.

Payroll taxes

Taxes based on the payroll of a business.

Lookback period

The 12-month period that ends on June 30th of the prior year that is used to determine how frequently a business must deposit payroll taxes.

Financial leverage

The ability of a business use borrowed funds to increase its earnings.

Auditor

The accountant who conducts the audit.

Payroll clerk

The accounting staff position that compiles and computes payroll data, then prepares, journalizes, and posts payroll transactions.

Ending inventory

The actual count of merchandise at the end of a fiscal period.

Markup

The amount a business adds to the cost of merchandise to establish the selling price.

Cost of merchandise

The amount a business pays for goods it purchases to sell.

Selling price

The amount a business receives from the sale of an item of merchandise.

Net realizable value

The amount of accounts receivable a business expects to collect.

Payout ratio

The amount of dividends divided by net income.

Beginning inventory

The amount of inventory on hand at the beginning of a fiscal period.

Net sales

The amount of sales, less sales discounts and sales returns and allowances.

Working capital

The amount of total current assets less total current liabilities.

Taxable income

The amount of total income minus adjustments, deductions, and exemptions that is used to calculate income tax.

Adjusted gross income

The amount of total income minus adjustments, reported on Form 1040.

Wage

The amount paid to an employee for every hour worked.

Owner's equity

The amount remaining after the value of all liabilities is subtracted from the value of all assets.

Maturity value

The amount that is due on the maturity date of a note.

Salvage value

The amount that will be received for an asset at the time of its disposal.

Debt ratio

Total liabilities divided by total assets.

Operating expense ratio

Total operating expenses as a percent of net sales.

Recurring entries

Transactions that are set up for automated entry in computerized accounting systems.

Posting

Transferring information from a journal entry to a ledger account.

Weighted-average inventory costing method

Using the average cost of beginning inventory plus merchandise purchased during a fiscal period to calculate the cost of merchandise sold.

Lower of cost or market

Using the lower of cost or market price to calculate the cost of ending merchandise inventory.

First-in, first out inventory costing method

Using the price of merchandise purchased first to calculate the cost of merchandise sold first

Last-in, first-out inventory costing method

Using the price of merchandise purchased last to calculate the cost of merchandise sold first.

Purchases discount

When a company that has purchased merchandise on account takes a cash discount.

Foreclosure

When the bank or finance company takes possession of mortgaged property.

Opening an account

Writing an account title and number on the heading of an account.

EFT

electronic funds transfeR

FUTA

federal unemployment tax

FIFO

first-in, first-out inventory costing method

IRA

individual retirement account

LIFO

last-in, first-out inventory costing method

NSF check

non-sufficient funds check

SUTA

state unemployment tax