Accounting

Purchases Journal.

A book of original entry used to record purchases of merchandise on credit only.

Combination Journal.

A book of original entry which combines into one journal the features of the two-column general journal and a special journal.

Creditor.

A business or individual to whom a debt is owed.

Postdated Check.

A check dated subsequent to (following) its date of issuance.

Bank Draft.

A check drawn by one bank on another bank in which it has funds on deposit.

Cashiers' Check.

A check drawn by the back on its own funds and signed by an officer of the bank.

Dishonored Check.

A check not paid by the bank when properly presented.

Certified Check.

A check that carries the guarantee of the bank that sufficient funds are available to pay the check when it is presented.

Cancelled Check.

A check that has been paid by the bank and returned to the drawer for recordkeeping.

In Balance.

A condition in which the total of the debits and the total of the credits are equal in an account.

Credit Balance.

A condition that occurs when the total of credits in an account is larger than the total of the debits in that account.

Debit Balance.

A condition that occurs when the total of the debits in an account is larger than the total of the credits in that account.

Fiscal Period.

A period of time covered by an income statement.

Drawer.

A person (depositor) who signs a check, ordering a payment to be made.

Purchase Invoice.

A source document prepared by the seller listiing the items shipped, their cost and the method of shipment (from the buyer's viewpoint).

Sales Invoice.

A source document prepared by the seller that lists the items shipped, their cost and the method of shipment (from the seller's viewpoint).

Inventory.

A source document showing quantity, description, prices of items, total amount of purchase and the terms of payment.

Special Journal.

A special journal designed to accumulate data about only one kind of business transaction.

Income tax.

A tax levied on the earnings of individuals and businesses by Federal, state and local governments.

Sales.

A temporary owner's equity account used to record the earning of revenue.

Sales Returns and Allowances.

A temporary owner's equity contra account used to record credit given to a customer for shortages or damaged goods.

Sales Discount.

A temporary owner's equity contra account used to record discounts given to customers as an incentive for prompt payment.

Purchases Discount.

A temporary owner's equity contra account used to record discounts taken on inventory purchases; the amount of any discounts granted by suppliers to encourage prompt payment of their invoices.

Transaction.

Any activity of a business enterprise that involves the exchange of values.

Independent Contractor.

Any person who agrees to perform a service for a fee and who is not subject to the control of those for whom the service is performed.

Accounting Equation.

Assets equal liabilities plus owner's equity (capital).

Summarizing.

Brining accounting data together in a way that will further enhance its usefulness, usually by means of reports and statements.

Current Assets.

Cash or other assets that will be converted into cash or consumed within one year.

Quick Assets.

Cash, marketable securities, accounts and notes receivable.

Outstanding Checks.

Checks that have been drawn and subtracted from the depositor's checkbook, but which have not yet been presented to the bank for payment.

Cash.

Coins, currency (paper money) checks, credit card receipts, and money orders received from others, as well as money deposited in the bank.

Deposits in Transit.

Deposits that have been made and added to depositor's checkbook, but which have not yet been listed on the bank statement.

Analyzing.

Determining the fundamental significance of business transactions so that financial information may be properly processed.

Cash Discounts.

Discounts from quoted prices as in inducement from prompt payment of invoices.

W-4 Form.

Employee's Withholding Allowance Certificate.

Adjusting Entries.

Entries made at the conclusion of a fiscal period to bring accounts up to date.

Closing Entries.

Entries made at the end of each reporting period to transfer the balances of the temporary owner's equity accounts to the permanent owner's equity account and to reduce the balance in the temporary owner's equity accounts to zero in preparation for the next accounting period.

Operating Expenses/Overhead.

Expenses incurred in the normal operation of a business.

Chronological.

In accounting, to record in order of time.

Accounts Receivable Turnover.

Measures how many times per year receivables are collected. CALCULATION: net credit sales divided by Average Accounts Receivable. Average Accounts Receivable (Beginning Accounts Receivable - Ending Accounts Receivable) divided by 2.

Age of Accounts Receivable.

Measures the average time required to collect receivables. CALCULATION: 360 days divided by Accounts Receivable Turnover.

Cash Payments/Cash Disbursements.

Money and money substitutes paid.

Interest.

Money paid for the use of money.

Employee.

One who is under the control and direction of an employer with regard to the performance of employment.

N.S.F.

The abbreviation for not sufficient funds.

S.U.T.A.

The abbreviation for state unemployment tax act.

Owner's Equity/Net Worth/Capital/Proprietorship.

The amount by which the total assets exceed the total liabilities of a business; an owner's financial interest in a business.

Take Home Pay/Net Pay.

The amount of pay after deductions (income taxes, F.I.C.A. taxes, etc.) have been subtracted.

Federal Income Tax Withholding.

The amount that an employer must withold from an employee's pay for income tax purposes.

General Ledger.

The book of accounts.

Debtor.

The business or individual who owes a debt.

Recording/Data Entry.

The committing of a business transaction and the events surrounding such into writing.

Maturity Date.

The date on which payment is due on a promissory note.

Net Loss.

The difference between gross profit and expenses when expenses are larger.

Net Income/Net Profit.

The difference between gross profit and expenses when gross profit is larger.

Account Balance.

The difference between the total debits and the total credits in an account.

Transaction Analysis.

The effect of transactions on the accounting elements.

Useful Life.

The estimated life of a fixed asset.

Principal.

The face value of a promissory note upon which interest in computed.

Source Document/Business Paper.

The first record of business transaction (examples include check stubs, receipts, sales invoices, purchase invoices, cash register tapes, etc.)

Depreciation.

The loss in value of a fixed asset due to wear and tear and the passage of time; or a method of matching the cost of a fixed asset against the revenues that the fixed asset will help produce during its useful life.

Proving Cash.

The process of determining whether the amount of cash, both on hand and in the bank, is the same as that which is indicated in the accounting records.

Federal Unemployment Tax Act (FUTA)

A Federal act imposed upon each employer for the purpose of financing the administration costs of the Federal and state unemployment compensation programs.

Federal Insurance Contributions Tax (FICA).

A Federal act which requires most employer and employees to pay taxes to support the Federal social security program.

Deposit Ticket/Deposit Slip.

A bank form which lists those cash items (currency and coin) and individual checks to be deposited.

Ledger.

A book of accounts.

Cash Receipts Journal.

A book of original entries in which only cash receipts are recorded.

General Journal.

A book of original entry in which business transactions are recorded in chronological order.

Sales Journal.

A book of original entry used for the recording of sales of merchandise on credit only.

Allowance for Doubtful Accounts (Allowance for Bad Debts)

A contra account utilized to accumulate totals against accounts accounts receivable.

Expense.

A decrease in assets, other than withdrawals by the owner, which result from efforts to produce revenues.

Account.

A device for recording the changes (increases or decreases) in the fundamental accounting elements.

Wages.

A form of compensation usually for skilled and unskilled labor, expressed in terms of hours, weeks or pieces completed.

Check Stub.

A form on which information is recorded by the drawer of a check concerning the check drawn; a source document.

Petty Cash Voucher.

A form used to reflect payments from the petty cash fund.

Purchase Requisition.

A form used to request the responsible person or department to purchase merchandise or other property.

Balance Sheet/Statement of Financial Position/Statement of Financial Condition.

A formal financial statement illustrating the assets, liabilities, and owner's equity of a business as of a specific date.

Income Statement/Profit and Loss Statement/Statement of Operations/Operating Statement.

A formal financial statement which presents the income, expenses, and resulting net profit or net loss for a given period.

Statement of Owner's Equity/Statement of Net Worth.

A formal financial statement which summarizes all of the changes in owner's equity during a specified period of time.

Budget.

A formal written statement, which may be based upon adjusted historical data, of management's plans for the future expressed in financial terms.

Petty Cash Fund.

A fund of currency and coin established for the payment of small amounts of money.

Chart of Accounts.

A list of all the account titles and the account numbers assigned to them.

Mortgage Payable.

A long-term liability; a written promise that pledges real property as security for payment of a debt.

Straight Line Depreciation.

A method in which the depreciable cost basis (original cost basis less salvage value) of an asset is apportioned equally over its estimate useful life expressed in terms of months or years.

Banker's Method/360 Day Method.

A method of computing interest based on the assumption that there are 360 days in a year.

Payee.

A person or company who will receive payment on a promissory note, check, draft, or money order.

Endorser.

A person or company whose name is written on the back of a check.

Drawee.

A person or concern, usually a bank, that has been ordered to make a payment of a check or draft.

Check.

A piece of commercial paper drawn on funds in a bank account and payable on demand.

Cross Referencing.

A process of entering the journal page number in the ledger and the ledger account number in the journal.

Double Entry Accounting/Double Entry Bookkeeping.

A process of recording equal debits and credits for a single business transaction.

Proving the Journal.

A process which examines each page of a journal, confirming that the debit entries equal the credit entries on each page.

Statement of Account.

A report sent to each customer, usually at the end of the month, which indicates the status of their account.

Drawing Account/Owner Withdrawal.

A seperate owner's equity account in which withdrawals or cash or other assets by the owner for personal use are recorded.

T Account.

A skeleton form of an account used for instructional purposes.

Credit Memorandum.

A source document that grants credit to a buyer for purchase return or purchase allowance.

Cash Short and Over.

A special ledger account that is used to keep track of unexplained shortages or overages of cash.

Discount Period.

A specific number of days during which a discount is available if the account is paid.

Retail Sales Tax.

A tax imposed on tangible personal property sold at retail.

Purchases Returns and Allowances.

A temporary owner's equity contra account utilized to record the return of merchandise to the manufacturer or supplier as the result of material defects in workmanship and/or inferior product quality.

Quarterly.

A three-month period.

Footing/Pencil Footing.

A total written in small pencil figures, under the last entry in a column of an account.

Calendar Year.

A twelve-month period beginning January 1 and concluding on December 31.

Supplies.

A type of asset that will be consumed as it is used (Examples: embalming supplies and office supplies).

Post-Closing Trial Balance.

A work paper prepared after all the owner's temporary equity accounts have been closed and all permanent accounts have been balanced and ruled, proving the equality of the debits and credits.

Trial Balance.

A work paper proving the equality of the debit and credit balances in the ledger.

Purchase Order.

A written order by a buyer for merchandise or other property specified in the purchase requisition.

Promissory Note.

A written promise made by a person or business to pay a certain sum of money to another person or business at a specified time in the future.

Note Receivable.

A written promise of a customer to pay the business a sum of money at a future date.

Note Payable.

A written promise to pay a creditor a certain amount in the future.

Bad Debts Expense/Uncollectible Accounts Expense/Loss from Uncollectible Accounts.

Accounts receivable that are uncollectible.

Temporary Owner's Equity Accounts.

Accounts utilized to accumulate income, expenses and owner's withdrawals for one accounting period only.

Contra Account.

An account designed to accumulate totals to offset a related account.

Compound Journal Entry.

An accounting entry that involves more than two accounts.

Cash Basis Accounting.

An accounting practice in which revenue is not recognized in the accounting records until received and in which expenses are not recognized until paid.

Transposition Error.

An amount written with digits in incorrect order.

Restrictive Endorsement.

An endorsement that limits the use of funds to the purpose stated (Example: "For Deposit Only")

Worksheet.

An expanded trial balance utilized for computing, classifying, and sorting account balances before preparing the formal financial statements.

Accrued Expense.

An expense incurred in operating a business during an accounting period but not yet paid.

Certified Public Accountant/C.P.A.

An individual possessing a college education, having practical experience in accounting and who has passed a comprehensive state examination in order to be certified to practice public accounting in that state.

Maker.

An individual who promises to pay on a promissory note; an individual who signs a promissory note.

Income/Revenue.

An inflow of assets as a result of selling a product or providing a service.

Bank Statement.

An itemized listing prepared by the bank of additions to and subractions from a depositor's account.

Stop Payment Order.

An order by a depositor requesting a bank not to pay on a check previously issued.

Account Receivable.

An unwritten promise by a customer to pay at a later date for goods sold or services rendered.

Account Payable.

An unwritten promise to pay creditor's for property such as merchandise, supplies or equipment purchased on credit, or for services received on credit.

Other Expenses.

Expenses incurred that are not the direct result of regular trading activities of a business.

Interpreting.

Explaining the significant events or developments that occur, usually taking the form of analysis and comparisons.

Salary.

Generally considered to be compensation for managerial or administrative services, expressed in terms of a month or year.

Merchandise/Inventory.

Goods purchased for resale at a profit.

Net Pay/Net Earnings.

Gross pay less payroll deductions; employee's take home pay.

Gross Profit Percentage.

Gross profit divided by net sales.

Accrued Income.

Income actually earned during an accounting period but which will not be received until a future period.

Gross Earnings/Gross Pay.

Income before any deductions have been made.

Other Income.

Income received that is not the direct result of regular trading activities of a business.

Prepaid Expenses.

Items that are considered to be assets when acquired, but which will become expenses when they are consumed or expired.

Activity Analysis.

Measures how efficiently a firm is utilizing its assets.

Liquidity Analysis.

Measures the ability of the firm to meet its current obligations.

Profit Margin.

Net income divided by net sales.

Gross Profit/Gross Margin.

Net sales minus the cost of goods sold.

Capital.

Owner's equity.

Fixes Assets/Long Term Assets.

Property of a relatively permanent nature used in the operation of a business and not intended for resale.

Assets.

Property of monetary value owned by a business.

Profitability Analysis.

Provides evidence concerning the earnings potential of a company and how effectively the firm is being managed.

Net Purchases.

Purchases minus purchase returns and allowances minus purchase discounts.

Acid Test Ratio/Quick Ratio.

Quick assets divided by current liabilities.

Accrual Accounting.

Recording in each fiscal period applicable expenses, whether paid or not, and income earned.

Net Sales.

Sales minus sales returns and allowances minus sales discount.

Depreciation Expense.

That portion of the original cost of a fixed asset that is assigned as an expense to the reporting period expected to benefit from its use.

CR.

The abbreviation for credit.

E.O.M.

The abbreviation for end of the month.

Rate.

The annual percentage rate used to compute interest.

Blank Endorsement.

The handwritten signature of the payee on the back of the check.

Debit.

The left side of a standard account.

Inventory Turnover.

The number of times the average inventory has been sold or used up (turned over) during a period. CALCULATION: 365/Cost of Goods Sold for Period/Average Inventory. NOTE: Average Inventory = (Beginning Inventory + Ending Inventory) divided by 2.

Time/Term of Note.

The period of time from the date of the note to the maturity date.

Face of Note.

The principal sum the maker of a note promises to pay.

Bank Statement Reconciliation.

The process by which the depositor verifies agreement between his checkbook balance and the bank statement balance.

Accounting Cycle.

The process involved in journalizing, posting to the ledger, taking a trial balance, preparing statements, making adjusting and closing entries, and preparing a post-closing trial balance, which is repeated each fiscal period.

Final Processing/Reporting.

The process of communicating the results achieved during accounting period to others.

Journalizing.

The process of recording business transactions in a journal.

Bookkeeping.

The recording of financial information in a prescribed manner.

Credit.

The right side of a standard account.

Endorsement.

The signature of the payee or other holder placed on the back of a check or other negotiable instrument.

Classifying.

The sorting of the many business transactions in an orderly and systematic manner.

Tangible Assets.

Those assets that can be appraised by value or seen or touched.

Intangible Assets.

Those assets that cannot be touched or grasped (examples include patents, copyrights and goodwill).

W-2 Form.

Wage and Tax Statement; a report furnished by the employer for each employee indicating gross earnings and deductions for income and F.I.C.A. taxes.

Disbursement.

A payment.

Liabilities.

Any debts that a business owes.

Fixed Liabilities/Long Term Liabilities.

Liabilities that are not due and payable within one year.

Accountant.

One who is concerned with the design of the system of records, the preparation of reports based upon the recorded data, and the interpretation of the reports.

Bookkeeper/Information Processor.

One who is involved in the process of recording financial information in a prescribed manner.

Original Cost Basis.

The amount originally paid for a depreciable asset.

Book Value/Undepreciated Cost.

The cost of a fixed asset less its accumulated depreciation.

Overdraft.

The issuance of a check without sufficient funds in the account when it is presented for payment.

Posting.

The transferal of data from the journal to the ledger.

Adjusted Trial Balance.

The trial balance taken after adjusting entries have been recorded.