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