Account: A record of increases and decreases in each of the basic elements of the financial statements (each of the company's asset, liability, stockholders' equity, revenue, expense, gain, and loss items)
Accounting: The process of identifying, measuring recording, and communicating financial information about a company's activities so decision makers can make informed decisions
Accrual Accounting: A method of accounting in which revenues are generally recorded when earned (rather than when cash is received) and expenses are matched to the periods in which they help produce revenues (rather than when cash is paid)
Accumulated Depreciation: The total amount of depreciation expense that has been recorded for an asset since the asset was acquired. It is reported on the balance sheet as a contra-asset
Adjusting Entry: Journal entries that are made at the end of an accounting period to record the completed portion of partially completed transactions
Asset: Economic resources representing expected future economic benefits controlled by the business (e.g., cash, accounts receivable, inventory, land, buildings, equipment, and intangible assets)
Balance Sheet: A financial statement that reports the resources (assets) owned by a company and the claims against those resources (liabilities and stockholders' equity) at a specific point in time
Bank Statement: A document that shows the beginning and ending account balance and the individual deposits and withdrawals recorded by the bank during the period
Cash Budget, Capital Budget, Operating Budget: process by which management allocated corporate resources, evaluates financial out comes and established system to control operational and financial performance
Cash Equivalents: Short-term, highly liquid investments that are readily convertible to cash and have original maturities of three months of less
Cash Flow: A measure of an organization's liquidity that usually consists of net income after taxes plus non cash charges (as depreciation) against income
Cash: Money in the form of bills or coins, currency, and assets
Cash-Basis Accounting: A method of accounting in which revenue is recorded when cash is received, regardless of when it is actually earned. Similarly, an expense is recorded when cash is paid, regardless of when it is actually incurred. Cash-basis accounting does not tie recognition of revenues and expenses to the actual business activity but rather to the exchange of cash
Comparability: One of the four qualitative characteristics that useful information should possess. Information has comparability if it allows comparisons to be made between companies
Consistency: One of the four qualitative characteristics that useful information should possess. Consistency refers to the application of the same accounting principles by a single company over time
Contribution Margin: Difference between the cost and final selling price/ The difference between variable revenue and variable cost
Corporation: A company chartered by the state to conduct business as an "artificial person" and owned by one or more stockholders
Cost Center: A section of a business to which costs can be assigned in an analysis of the relationship of costs and the value of benefits arising from them
Cost of Capital: Required return necessary to make a capital budgeting project worthwhile; includes cost of debt and cost of equity
Cost of Goods Sold: Amount on an income statement that represents the cost of purchasing raw materials and manufacturing finished products; found on the income statement
Cost of Sales: The cost to the seller of all goods sold during the accounting period
Credit Terms: The conditions in which credit will be extended to a customer
Credit: The right side of a T account; alternatively, credit my refer to the act of entering an amount on the right side of an account
Debit: The left side of a T account; alternatively, debit may refer to the act of entering an amount on the left side of an account
Depreciation: Expense allowance made for wear and tear on an asset over its estimated useful life
Equity: Value of the business to the owner of the business (which is the difference between the businesses assets and liabilities)
Expenses: Goods or services purchased directly for the running of the business
Factoring: Is the practice of buying debt at a discount
Financing Assets: The difference between the cost of financing the purchase of an asset and the assets cash yield
Financing Cycle: The elapsed time between the receipt of financial resources from owners and creditors and the repayment of the original amounts received
Fundamental Accounting Equation: Assets = Liabilities + Stockholders' Equity. The left side of the accounting equation shows the assets, or economic resources of a company. The right side of the accounting equation indicates who has a claim on the company's assets
Income Statement: Financial document showing a company’s income and expenses over a given time period
Incremental Analysis: Small changes in specific variables studied in terms of the effect on related variables
Indirect Costs: Costs incurred but not generally associated with any one project, i.e. building maintenance or clerical salaries
Internal Control System: The policies and procedures established by top management and the board of directors to provide reasonable assurance the company's objectives are being met in three areas: (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, and (3) compliance with applicable laws and regulations
Inventory: Detailed itemized list, record or report of things in one’s possession, especially a periodic survey of all goods and materials in stock
Invoice: Billing documents that are prepared based on the order document
Journalizing: The process of making a journal entry
Leverage: The use of credit or borrowed funds to improve one’s speculative capacity and rate of return on investments; using margin
Liabilities: Financial obligations and responsibilities; debt
Liquidity: Available cash or the capacity to obtain cash on demand
Long-term Debt: Borrowings that will not be due within the current 12 month period, but in future years
Marginal Analysis: An analytical technique which focuses attention on incremental changes in total values, such as the last unit of a good consumed, or the increase in total cost.
Matching Principle: A principle that requires an expense to be recorded and reported in the same period as the revenue that it helped generate
Net Income: The excess of a company's revenue over its expenses during a period of time
Net Profit: A company’s total revenue less total expenses
Operating Cycle: The average time that it takes a company to purchase goods, resell the goods, and collect the cash from customers
Overhead: The expenses of a business that are not attributable directly to the production or sale of goods
Partnership: A business owned jointly by two or more individuals
Payback: Money, consideration that is given in return for favors, money or consideration
Permanent Accounts: Accounts of asset, liability, and stockholders' equity items whose balances are carried forward from the current accounting period to future accounting periods
Plant & Equipment: How much the company has invested in its properties, buildings and equipment
Posting: The process of transferring information from journalized transactions to the general ledger
Pro Forma Statement: Balance sheets and income statements that are generated using spread sheet software could be done on a personal computer
Profit Center: Established when an organizational unit controls both its resources and its products or services, allows a company to be organized into divisions of separate product lines
Realizable: One of two requirements for revenue to be recognized. An item is realized, or realizable, if noncash or near cash (e.g., accounts receivable)
Receivables: Monies due your enterprise as the result of day-to-day operations
Retained Earnings: Profits retained by the enterprise rather than disbursing to the shareholders. Retained earnings are used to improve the value of the enterprise through development and /or promotional programs
Revenue: The dollar amount of sales during a specific period
Shareholder: The owners of a corporation who own its shares in varying numbers
Short-term Debt: The amount of debt incurred in a short period of time
Statement of Cash Flows: A financial statement that provides relevant information about a company's cash receipts (inflows of cash) and cash payments (outflows of cash) during an accounting period
Stockholder's Equity: The owners' claims against the assets of a corporation after all liabilities have been deducted
Temporary Accounts: The accounts of revenue, expense, and dividend items that are used to collect the activities of only one period
Time Period Assumption: One of the four basic assumptions that underlie accounting that allows the life of a company to be divided into artificial time periods so net income can be measured for a specific period of time (e.g., monthly, quarterly, annually)
Trend Analysis: The number of times an asset is replaced during a given period