Matthew Gaines Accounting Terminology
Delinquent account
Account owed by the customer that is late
Allowance for doubtful accounts
Account that contains the estimate of receivables that won't be collected
Contra asset
Account that is associated with a particular asset but its balance is opposite of that of that asset's balance
Purchases
Account used in the periodic inventory system to record the acquisition of merchandise for resale
Income summary account
Account used to close out (bring to zero) the temporary accounts and to transfer net income or net loss to the retained earnings account
Monetary unit assumption
Accounting assumption that states the US dollar is assumed to be constant
Periodicity
Accounting guideline requiring the results of operations be divided into periods of a year, quarter, or month with the time period specified in the heading of the income statement
Full disclosure
Accounting principle that requires enough information and detail to make adequate decisions
Lower of cost or market
Accounting rule that requires inventory to be listed on the balance sheet at the lower of its cost or replacement value
Leasehold improvements
Additions or changes to a rented building that are made by the tenant
Contract
Agreement between two or more parties that creates enforceable agreement
Credit terms
Agreement made between a customer and a seller that specifies the discount for early payment and length of credit period
Lease
Agreement to pay rent to the lessor for a stated period of time
Permanent accounts
All accounts that are reported on the balance sheet, carried from period to period
Available for sale securities
All passive investment owned by a company AFTER trading securities and debt held to maturity
Income statement
Also known as profit/loss statement, shows revenues earned during a period of time, the expenses required to produce that revenue and income or loss for that same period
Credit
Amount entered on the right of side of an account ledger, either increase or a decrease
Fiscal year
An accounting year that ends on a date other than December 31st
Prepaid advertising
An asset that is the value paid for advertising before the advertising has run
FORM 10-K
Annual report that must be filed with securities and exchanges commission by corporations whose stock is publicly traded on a US exchange, report contains financial statements and other info
Par value of stock
Arbitrary value assigned to a share of stock, some state laws require or may have required common stock issued by corporations residing in their state to have a par value
Balance sheet equation **
Assets = Liabilities + Owner's Equity
Accounting equation **
Assets = Liabilities + Owner's Equity (also known as the balance sheet equation)
Intangible assets
Assets that carry certain rights or privileges but have no physical substance
Current assets
Assets that will be converted or turned into cash with one year
Long-term assets
Assets with an expected useful life of a year or more
Continuity assumption
Assumption that entity will continue in existence into the foreseeable future
External auditors
Auditors from CPA that are independent and are responsible for ensuring accuracy of financial statements
Classified balance sheet
Balance sheet with groupings of similar assets
Financial statements
Balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholder's equity
Account
Basic record used in accounting system to keep track of financial obligations includes: assets, liabilities, equities, revenues and expenses
Accounting principles
Basic standards, rules, and guidelines to prepare a financial statement or for use in financial reporting
Accrual accounting
Basis for recording of transactions under the generally accepted accounting principles (GAAP). Revenue is recorded when sale is made, not when cash flow occurs
Invoice
Bill of charges prepared and issued by seller of merchandise or provider of services
Secured bond
Bond that has collateral that stands behind or secures its ultimate payment
zero coupon bonds
Bonds that are sold at a discount and provided that all the interest is earned by paying the full face value at maturity
Convertible bonds
Bonds that stockholders may convert into capital stock
Capital stock
Broad description of ownership interest in a corporation
Internal Revenue Service
Bureau of the US Department of the Treasury responsible for collecting taxes and the interpretation and enforcement of the IRC
Additional Paid-in capital
Capital paid into the corporation from the purchase of capital stock that is above the par value of the stock
Contributed capital
Cash and sometimes other assets the business owners contribute
Cash flow from finance
Cash flows from the issuance of capital stock, debt securities, dividend payments, repayment of debt and purchase of treasury stock
Cash receipts
Cash received by a company
Receipts
Cash received by a company
Reliability
Characteristic of info when it is verifiable, objective and dependable
Relevance
Characteristic that makes information useful or can influence decision making, relevance happens when info is timely and has a predicitive value
General journal
Chronological record of original entry that requires both the account being debited and the account to be listed with respective amounts
Lien
Claim on an asset that is pledged as collateral
Ledger
Collection of accounts
Notes to financial statements
Comments providing additional info pertaining to a company's operations and financial position
Merchandiser
Company that sells merchandise
Treasury stock
Company's own stock that has been reacquired by the company
Bank reconciliation
Comparing the balance of the cash bank account to the balance of bank statement in order to find differences between the two and further ensure GAAP
Salary
Compensation arrangement with executives, managers and office staff whose pay is stated on a monthly or annual basis
Purchase discount
Contra purchases account used in a periodic inventory system that is the amount of merchandise returned to suppliers and the amount allowed as deductions (allowance) by suppliers for goods not returned
Sales returns and allowances
Contra revenue account that reports the merchandise returned by a customer and the allowances granted to a customer because the seller shipped improper or defective merchandise
Operating expenses
Cost incurred in carrying out an organizations day-to-day activities, including payroll, sales commissions, employee benefits, transportation and travel, rent repairs, amortization and depreciation and taxes
Freight in
Cost of shipping goods to the buyer (paid by the buyer)
Freight out
Cost of shipping goods to the buyer (paid by the seller)
Book value
Cost of the asset minus accumulated depreciation
Research and development costs
Costs incurred to develop new products or processes that may result in commercially viable products
Physical count
Count of the inventory on hand
Retained earnings
Cumulative earnings of a business; net income that has not been distributed to owners usually calculated by adding net income to beginning retained earnings and subtracting dividends paid
Cash
Currency or any instrument that banks will accept for deposit and immediate credit
Prepaid expense
Current asset that is the amount paid in advance for future expenses
Prepaid insurance
Current asset that represents the amount paid for insurance coverage in advance of that coverage being enforced or before it has expired
Supplies
Current asset that represents the cost of the consumables (within a year) the company has on hand
Working capital
Current assets minus current liabilities
Dividends payable
Current liability account that reports the amounts of cash dividends declared by the board of directors but not yet paid to the stockholders
Effective interest rate
Current rate of interest on a debt (bond)
Present value
Current value of an amount to be received in the future
Bond
Debt investment in which a investor loans money for a defined period of time, at a fixed interest rate
Current liabilities
Debts and other obligations owed within one year
Impairment
Decrease in the value of a longterm asset to an amount that is less than the amount shown under cost principle
Losses
Decreases in equity resulting from transactions of an entity
deferral
Delay in recognizing certain revenues or expenses until a later date
Mid-month convention
Depreciation assumption that assumes that in the month an asset is acquired or disposed the transaction occurred in the middle of the year
Mid-year convention
Depreciation assumption that assumes that in the year an asset is acquired or disposed the transaction occurred in the middle of the year
Tax deprecitation
Depreciation calculated for income tax purposes. There are several methods allowed under the IRS code
Accelerated depreciation
Depreciation method that allows for more depreciation expenses in the first years than straight-line methods
Bond discount
Difference between selling price and the face value of a bond Ex Bonds face value is 1,000$ but sells for 800$ the discount rate is 200$
Stock dividend
Distribution of additional shares of the comapny's stock to its shareholders
Dividends in arrears
Dividends on cumulative preferred stock that haven't been paid in the past
Articles of incorporation (corporate charter)
Document filed with the state upon formation of a corporation that lists the number of shares a corporation issues
Bond indenture
Document that discloses the terms of a company's bond issue including the face value, interest rate, interest payment dates, call price and collateral.
Debit memorandum
Document that instructs the accountant to debit an accountant
Credit memorandum
Document/paper that authorizes a credit to an account
Inventory valuation
Dollar value placed on goods in a company's inventory
Transaction
Economic event that involves a change in an asset liability or stockholder's equity
Wages
Employee compensation that is calculated hourly
Internal auditors
Employees who provide information regarding operations and proper functions of internal controls
Closing entries
Entries made at the end of a period to bring the accounts that temporarily hold revenues and expenses
Sinking fund
Established by a corporation to pay off a loan or bond
Appraisal
Estimate of asset's market value
CPA exam
Exam consists of questions, exercises, and cases developed by the American Institute of Certified Public Accountants. Must be made through a state board of accountancy
Improvements
Expenditures that increase the productive life, increase operational efficiency, or expand the capacity of an asset
Ordinary repairs
Expenditures that only help maintain the productive capacity of the asset during the current accounting period, these are an operating expense
Income tax expense
Expense company recognizes it will have to repay the government
Interest expense
Expense for the cost of borrowing money, under GAAP the expense is the cost of the money that was used during the period covered by the income statement, not exactly the amount of interested paid during the time
Cost of goods sold
Expense of companies that sell products and is composed of costs incurred in order to sell the product
accrued expenses
Expense that has occurred, but the transaction has not been entered in the proper accounting record
Repairs
Expenses incurred to return an asset to previous condition
Sarbanes-Oxley Act of 2002
Federal law that set standards for all US company boards, management and public accounting firms, passed as a result of large corporate fraud
Bank service charge expense
Fees incurred by a company for the expenses associated with its checking account
Compilation
Financial Statements prepared by an accountant with review or audit, unsure if follows GAAP
Statement of retained earnings
Financial statement detailing the changes in the retained earning accounts for the same period as the income statement
Balance sheet
Financial statement that identifies a business's assets, liabilities and owners equity as of a certain a date
Statement of cash flows
Financial statement that provides a detailed summary of all the cash provided during the period and the uses of the cash
statement of stockholders' equity
Financial statement that shows all the changes to the various stockholders' equity accounts during the period of the income statement
Audited financial statements
Financial statements reviewed by CPA firm and independent auditors attesting to compliance with GAAP
Condensed financial statements
Financial statements that are in summary form
Annuity
Fixed amount of cash flow per period for a specific period of a time. EX: 30 year mortgage
Property, Plant, and Equipment (PP&E)
Fixed assets they are used in the operation of a business and have a useful life of more than one year
Cash flow from operating activities
From day to day, income producing activities
Cash flow from investing activies
From the purchases and sales of productive assets and other companies debt and equity
Merchandise inventory
Goods purchased to resell
Finished goods inventory
Goods that are ready for sale
Net pay
Gross pay less deductions
Income from operations
Gross profit less operating expenses, represents the amount of income before nonoperating items
Net operating income (NOI)
Income from operations (gross profit minus operating expense) excludes discontinued operations, extraordinary items and non operating items such as interest expense, investment income, gains and losses
Single-step income statement
Income statement format in which the operating and nonoperating revenues are grouped together and totaled and the operating and nonoperating expenses are grouped together and totaled
Extraordinary items
Income statement items that are unusual in nature and infrequent in occurrence
Multiple-step income statement
Income statement that has several steps to arive at net income and shows gross profit
Stock split
Increase in the total number of authorized shares thereby proportionally increasing the number of shares held by current stockholders
Gains
Increases in equity
Proprietor
Individual owner of a business, also called a sole proprietor
Revenues
Inflows or other enhancements of assets of an entity or settlement of liabilities during a period resulting from delivering or producing goods, rendering services, or other activities
Trademark
Intangible asset of a business registered with the US patent and trademark office
Interest earned (income)
Interest earned by the company via investments in things such as savings, accounts, CDs, notes and bonds
Interest payable
Interest owed to banks and other entities from which the company has borrowed money
Interest receivable
Interest owed to the company from entities to which it has extended credit
Cash flow
Into and out of a company
Work-in-process inventory
Inventory that is only partially complete
Common stock
Investment that is evidence of ownership in a corporation
Held-to-maturity securities
Investments that are intended to be held to the maturity
Special journal
Journal of original entry of a transaction except the general journal
Operating lease
Lease doesn't meet any four criteria for a capital lease under GAAP, it is an operating expense
Capital lease
Lease that meets at least one of the four GAAP criteria it is an asset AND a liability
Corporation
Legal entity organized under state laws that is separate from the owners and has shares
Franchise
Legal right to sell certain products, use certain trademarks, utilize certain systems, and possible control certain geographic areas
Long-term liabilities
Liabilities that will not be satisfied within one year
Payable
Liability
Accrued expenses payable
Liability account that reflects the estimated owed amount for expenses that have occurred but haven't been paid or recorded
Contingent Liability
Liability that results because of past event but hasn't been settled EX: Lawsuit
Certified public accountant (CPA)
License granted by states to individuals who passed the Uniform CPA exam and have met the work experience and education requirements
Trial balance
Listing of accounts from the general ledger along with each account's balance in the appropriate debit or credit column, step in the account cycle
Chart of accounts
Listing of the accounts in general ledger of the accounting system listed with balance sheet accounts first then income statement accounts
Secured loan
Loan that has collateral that stands behind or secures its ultimate payment
Land
Long term asset in which the account reports the cost of real property excluding the cost of any constructed asset, land is NOT depreciated
Land improvements
Long-term asset in which the cost is that of the constructed improvement to the land
Operating loss
Loss before nonoperating or other items are accounted for on the statement of income
Direct write off method
Method for recognizing bad debts expense arising from credit sales, under this method a customer's account receivable is written off directly to expense only after the account is determined to be uncollectible, method is required for income tax purposes but is not acceptable under GAAP
Last in, First out (LIFO)
Method of keeping track of inventory costs that assumes the most recently acquired units are sold first
First in First out (FIFO)
Method of valuing cost of goods sold and ending inventory that assumes the first goods purchased (in) are the first goods sold (out) that assumes the costs on hand are the most recent
Advertising expense
Money spent in order to educate consumers about product
Accounts receivable
Money that is owed to the company from customers as a result of credit sales
Gross margin
Net sales less cost of goods sold
Operating income
Net sales less cost of goods sold less operating expenses
Equipment
Noncurrent asset account that reports the cost of the machinery, tools, and other fixed assets other than buildings and land
Public Company Accounting Oversight Board (PCAOB)
Nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee and regulate the work of the auditors of the financial statements of corporations who issue their stock to the public
Financial Accounting Standards Board (FASB)
Nonprofit corporation that develops the rules for GAAP
Debenture
Obligation (bond) protected not by collateral but the credit rating of the issuer
Account payable
Obligations that arise from purchases on credit
Bad debt expense
Operating expense resulting from making sales on credit and estimating who will not repay within the period
American Accounting Association (AAA)
Organization composed of accounting professors and practicing accountants
Economic entity
Organization with activities that are separate from those of its owners and other entities
Source document
Original record showing the details behind a transaction
Expenditure
Outflow of cash
Expenses
Outflows or other uses of cash during a period resulting from delivering or producing goods, rendering services or carrying out other activities that constitute the entity's ongoing major or central operations
Shareholder
Owner of a corporation
Owner's equity
Owners' investment in the business
Board of directors
People elected by the common stockholders of a corporation to represent the holders, oversee the entity, establish policies, appoint officers of the corporation and vote on dividends to be paid
Contribution Margin
Per unit basis price minus variable cost per unit, on company wide basis it is sales minus total variable cost
Coupon bond
Periodically pays interest
Creditor
Person or entity that has granted credit to another person or entity and is owed money
Debtor
Person who owes money
Noncumulative preferred stock
Preferred stock that does not require past unpaid dividends to be paid before a dividend can be paid to common stock holders
Deferred revenues
Previously recorded liabilities that are adjusted at the end of a period and have been met and therefore earned
Current portion of long-term-debt
Principal portion of a debt that must be paid within one year
Objectivity
Principle of accounting that states the accountant must generate information that is fair, unbiased and objective
Matching principle
Principle requiring a company to match expenses with related revenues to report a company's net income or net loss profitability during a period
Assets
Probable future economic benefits or controlled by a particular entity
Liabilities
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events EX amount owed to lenders
Obsolescence
Process of assets becoming outdated or economically unfeasible to use, can be caused by technology advances
Aging of accounts receivable
Process resulting in a list of outstanding accounts sorted by age
P&L
Profit and loss statement
Warranties
Promises to repair, replace or refund a product during a specified period
Fixed assets
Property including land, plant (buildings) and equipment
Supplier
Provider of goods or services
Purchases, net
Purchases less purchase returns and purchase discounts
Consistency
Quality of accounting info that allows users to compare two or more financial statements within a firm
Comparability
Quality of accounting information that allows a user to make comparison of a financial statement of one entity to another
Subsidiary Ledger
Record of subaccounts that gives the details to support the related general ledger account
Sales discounts
Reduction in sales because the company grants the customer a discount for that good
Unearned revenue
Refers to funds collected to funds before a service is performed
Prepaid rent
Rent paid in advance of receiving the benefit of leased asset
Federal Unemployment Tax Act (FUTA)
Requires employers to make payments to the federal government to fund unemployment benefits, accounted as payroll expenses
Federal Insurance Contribution Act (FICA)
Requires employers to withhold amounts from employees paychecks for social security and medicare FICA contributions are matched by the employer
Noncurrent assets
Resources that the firm expects to convert to cash, use, or consume in a period greater than one year or one operating cycle whichever is longer
Bonk sinking fund
Restricted liquid asset owned by the corporation for the purpose of retiring a bond
Purchase return
Return of a purchased item
Sales
Revenue from providing goods to a customer
Accrued revenue
Revenue that has been earned but not yet recorded
Marketable securities
Safe havens involving the temporary use of excess cash to earn interest or dividends until the cash is needed
Credit sales
Sale made to a customer on a credit basis creates an account receivable
FOB (free on board) shipping point
Sales agreement terms that state the buyer must pay to get goods, title passes to the buyer at the shipping point, goods should not be reported as inventory but rather a purchase
FOB (free on board) destination
Sales agreement terms that state the seller must pay in order to get the goods to the destination, title passes from the buyer to the seller at the destination, goods in transit should be reported as inventory
Net sales
Sales revenue less sales returns and allowances less sales discounts
Management's discussion and analysis
Section of 10-K that contains info from management about the corporation's financial condition and operations
Ordinary annuity
Series of equal amounts of cash flow occurring at the end of each period
Annuity due
Series of equal cash flows due at the beginning of each period, otherwise known as annuity in advance
Audit
Series of procedures carried out by an accountant such as extensive transaction tests and internal controls to ensure compliance with GAAP
Transportation-in
Shipping cost of receiving goods
Transportation-out
Shipping cost of sending goods to a customer
Cash equivalents
Short-term assets that are readily converted into cash whose value will not change
Common size financial statement
Shows each item's amount as a percentage of total assets
Petty cash
Small cash fund for minor disbursements
Adjusting entries
Some accounts need adjustment so that both the balance sheet and income statement are accurate. These fall in five categories: prepaid expenses, recorded revenues, unrecorded accrued revenues, unrecorded accrued expenses and valuation of accounts receivables and investments
Cash receipts journal
Special journal where all cash receipts are recorded when received
Amortization
Spreading payments over multiple period
Officers
Staff of a corporation that are appointed by the BOD to carry out policies
Payroll Taxes
State and federal taxes employers must withhold from salaries and wages of employees
Convertible preferred stock
Stock that can be exchanged for a specific number of shares of common stock of the same company
Investments
Stocks and bonds owned by the business, land held for future use or speculative purposes and other marketable securities set aside in special funds
Double entry accounting system
System in which all transactions affect at least two accounts and the accounting equation always balances
Periodic inventory system
System in which ending inventory and cost of goods are determined at the end of the accounting period based on a physical account of inventory
Accounting
System that collects and reviews financial information about an organization and reports that info to decision makers
Perpetual system of inventory
System whereby a detailed inventory record is maintained constantly for each type of inventory item, each purchase and sale is reflected as a subsidiary record
Taxes payable
Taxes owed
Financial statement analysis
Techniques and methods employed to study financial statements and make conclusions about financial conditions, strengths, and weaknesses
International Financial Reporting Standards (IFRS)
The accounting and reporting standards developed by the International Accounting Standards Board, used by most businesses in other countries
Posting
The act of entering an amount in an account
Depletion
The allocation (Expense) of the cost of a natural resource such as minerals as it is extracted from the earth
Depreciation
The allocation of the cost of a long term tangible asset over the useful life of that asset
Amortization of bond discount
The allocation of the discount n bonds payable to bond interest expense over the life of the bond. Amortization of a bond payable discount increases the carrying value of the bond while recognizing interest expense.
Fair value
The amount at which an asset can be bought and sold for
Principal
The amount borrowed
Period cost
The amount for the current accounting period that is an expense
Paid-in capital
The amount of contributed capital less the par value of the stock
Principal payment
The amount of each loan payment less interest
Insurance expense
The amount of insurance that was incurred (expired) during the period, amount that hasn't expired should be listed as prepaid insurance under asset accounts
Residual value
The amount the asset owner expects to receive at the end of the useful life of an asset
Pension payable
The amount the entity owes as of the date of the balance sheet for the company's pension plan
Payroll withholdings
The amount withheld from employees payroll for social security tax, medicare tax, federal income tax, state income tax, and voluntary deductions
Net income
The bottom-line figure on the income statement, difference between revenues and expenses
Liquidity
The characteristic of an asset that represents how quickly it can be converted to cash without loss of value
Generally Accepted Accounting Principles
The combination of basic accounting standards, assumptions, principles and procedures that make up a framework of rules
Indenture
The contract of a bond or an agreement of a bond that spells out its provisions and features
Accumulated other comprehensive income
The corporation cumulative income that isn't reported as part of the net income as a result of hedges, pension liabilities, and unrealized gains/losses
Product warranty cost
The cost of repairing or replacing previously sold products during the period covered under the warranty
Historical Cost
The cost used to record the activities and transactions of a company, verified and can provide objective basis for pricing a company.
Dividend payment date
The date a corporation pays a dividend to it's shareholders
Record date
The date that a stockholder must be recorded as an owner of the stock to receive the declared dividend of the stock
Declaration date
The date that board of directors officially approves a dividend
Net asset value
The difference between an asset's value on the balance sheet less any associated contra asset account
Shareholders' equity
The difference between the assets and liabilities of a corporation including contributed capital and retained earnings
Premium on bonds payable
The difference between the issue price of a bond and the face value when the issue price is more than the face value
Bond premium
The difference between the selling price and face value when the price is HIGHER
General ledger
The element of the accounting system that contains the balance sheet and income statement accounts used for recording transactions trial balances are prepared from the general ledger
Pension expense
The employer's expense for the company's pension plan during the period
Lessor
The entity owning an asset and receiving rent from another entity
Goodwill
The excess of the purchase price of a business over the fair value of the acquired business's net assets
Copyright
The exclusive right to sell, publish, and use a literary, musical or artistic work
Estimated useful life
The expected amount of time a fixed asset will be used by the owner
Depreciation expense
The expense that allocates a portion of the cost of the buildings, machines, or equipment a company has purchase to the current fiscal year
Profitability
The extent to which a company can generate revenues in excess of expenses
Securities and Exchange Commission
The federal regulatory agency for the securities industry, SEC helps ensure full disclosure of significant financial information and facts to protect investors against fraud
Proprietorship
The form of a business that is owned by one person and NOT incorporated
Operating cycle
The length of time it takes a company to generate and collect cash from its operations and how long it takes to convert inventory to cash
Price/earnings ratio (P/E)
The market price of the company's common stock dividend by the earnings per share of that stock
American Institute of Certified Public Accountants (AICPA)
The national organization sets ethical standards and auditing standards for audits of private companies, nonprofit organizations, and federal, state local governments.
Earnings per share (EPS)
The net income of a corporation after income tax divided by the average number of outstanding shares
Market value
The number of common shares outstanding, multipled by the price per share at which the stock is currently trading at on a public exchange
Authorized number of shares of stock
The number of shares of stock that a corporation may issue based on articles of incorporation
Journal
The original book of entry for transactions
Acquisition cost
The price paid to obtain property
Face amount
The principal of a bond also called the maturity value
Recognition
The process of reporting an economic event in financial statements
General journal entry
The recording made in a general journal involving the date a transaction occurred, the name of the account that is debited and the amount debited and the name of the account credited and the amount credited
Journal entry
The recording of a transaction in chronological order with debits and credits to appropriate accounts
Lessee
The renter
Preemptive right
The right of current shareholders to maintain their proportional ownership of a company by buying a proportional number of shares of any future issue of common stock
Disposal of fixed assets
The sale retirement or exchange of property, plant, and equipment
Normal account balance
The side of the ledger a balance normally resides on (either debit or credit) Asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and stockholder's equity accounts normally have credit balances
Straight-line method of depreciation
The simplest method of allocating the cost of an asset over its useful life, allocates equal amounts of depreciation expense to each period over the useful life of the asset
Inventory
The stock of goods available for sale, merchandise on hand or in the case of the manufacturer, raw materials, work in process and finished goods
Collection period
The time in days for a company accounts receivable to be collected
Accounting cycle
The timeline for processing transactions includes: analysis, journalizing, posting, preparing trial balances, adjusting, and preparing financial statements
Accumulated depletion
The total amount of depletion that has accumulated since the associated natural resource was acquired
Accumulated Depreciation
The total depreciation since associated fixed asset was acquired
Comprehensive income
The total of the net income plus a few items that affect the owner's equity but are not reported
Selling and administrative expenses (operating expenses)
These expenses are reported in the period in which they were occurred, not in the one they were paid
Unqualified opinion
This is a report which the auditor concludes the financial statements fairly present the results of the company's operations and its financial position according to GAAP
Accounting period
Time period covered by income statement
Write-down
To reduce the value of an account
Write-off
To reduce the value of an account to zero
Controller
Top accounting officer of company
Chief Operating Officer
Top corporation officer who deals directly with operating business
Chief Financial Officer (CFO)
Top finance executive
Chief Executive Officer (CEO)
Top officer of a corporation who is charged with executing the policies enacted by BOD
Gross wages
Total number of hours worked during a period multiplied by the hourly rate
Outstanding shares
Total number of shares owed by stockholders as of a specific date
Gross sales
Total sales fora period before deducting sales returns and allowances and sales discounts
Adjusted trial balance
Trial balance is prepared after adjusting entries have been made
Post-closing trial balance
Trial balance prepared after temporary accounts have been closed
Double declining balance method of depreciation
Type of accelerated depreciation method that calculates at twice the rate of the straight line method
Financial accounting
Type of accounting that serves the needs of external users such as investors, creditors and regulates, guided by GAAP
Cash basis of accounting
Type of accounting which revenue is recorded as earned when received or collected and expenses are recorded as incurred.
Preferred right
Type of capital stock that provides a dividend that is paid before any dividends are paid to common stockholders and takes precedence over common stockholders in event of liquidation
Cumulative preferred stock
Type of preferred stock that has a feature whereby dividends that are not paid accumulate and must eventually be paid before any common stock dividends can be paid
Fees earned
Type of revenue for charges as a result of services rendered
Internal Revenue Code (IRC)
US law governing the taxing of income and the collection of those taxes
Conservatism
Underlying assumption of financial statements and a guiding principal which requires accountants to pick the method that will least overvalue the income and assets
Bonds payable
Usually a long-term liability account containing the face amount or the maturity amount of the bonds that are outstanding
Dividends declared
Vote by board of directors to pay dividends to shareholders
Net loss
When expenses are greater than income
Notes payable
Written promise signed by the maker of the note pay a certain sum of money, either on demand or at a future date
Promissory note
Written promise to pay interest and to repay the principal amount an obligation or loan
Discontinued operations
eliminating a component of the business from the company
Debit
entry on the left side of an account ledger, a debit to assets increases the account while a debt to liabilities or equities reduces the account