• bookkeeping

    This term could describe the first few steps in the accounting cycle.

    bookkeeping

    This term could describe the first few steps in the accounting cycle.

  • journal

    In a manual system, this is defined as a book of original entry. It is used less in a computerized system.

    journal

    In a manual system, this is defined as a book of original entry. It is used less in a computerized system.

  • journal entry

    This describes the debit and credit amounts and accounts that get recorded in the general journal. The amounts will be posted to the general ledger accounts.

    journal entry

    This describes the debit and credit amounts and accounts that get recorded in the general journal. The amounts will be posted to the general ledger accounts.

  • chart of accounts

    This is a listing of the general ledger accounts. However, it does not contain amounts.

    chart of accounts

    This is a listing of the general ledger accounts. However, it does not contain amounts.

  • debit

    This term indicates the left side of a general ledger account and it is the normal balance for asset, expense, and loss accounts.

    debit

    This term indicates the left side of a general ledger account and it is the normal balance for asset, expense, and loss accounts.

  • credit

    This term indicates the right side of a general ledger account and it is the normal balance for liability, stockholders’ equity, revenue, and gain accounts.

    credit

    This term indicates the right side of a general ledger account and it is the normal balance for liability, stockholders’ equity, revenue, and gain accounts.

  • double entry

    Under this system every transaction will involve at least two general ledger accounts. It also requires that the total of the debit amounts be equal to the total of the credit amounts.

    double entry

    Under this system every transaction will involve at least two general ledger accounts. It also requires that the total of the debit amounts be equal to the total of the credit amounts.

  • bookkeeping equation (or) accounting equation

    This mathematical expression is assets = liabilities + stockholders’ (or owner’s) equity and should always be in balance when the double-entry system is used.

    bookkeeping equation (or) accounting equation

    This mathematical expression is assets = liabilities + stockholders’ (or owner’s) equity and should always be in balance when the double-entry system is used.

  • account

    Two or more of these general ledger records are required for every transaction.

    account

    Two or more of these general ledger records are required for every transaction.

  • trial balance

    This internal report lists the balances in each of the general ledger accounts in either a debit or credit column. Its purpose is to confirm that the debits are equal to the credits.

    trial balance

    This internal report lists the balances in each of the general ledger accounts in either a debit or credit column. Its purpose is to confirm that the debits are equal to the credits.

  • adjusting entry

    This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a balance sheet account and an income statement account.)

    adjusting entry

    This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a balance sheet account and an income statement account.)

  • balance sheet accounts (or) permanent accounts (or) real accounts

    This group of general ledger accounts will not be closed at the end of an accounting period.

    balance sheet accounts (or) permanent accounts (or) real accounts

    This group of general ledger accounts will not be closed at the end of an accounting period.

  • income statement accounts (or) temporary accounts (or) nominal accounts

    This group of general ledger accounts will be closed at the end of each accounting period.

    income statement accounts (or) temporary accounts (or) nominal accounts

    This group of general ledger accounts will be closed at the end of each accounting period.

  • depreciation

    This is the systematic allocation of a plant asset’s cost to expense over the useful life of the asset in order to match an asset’s cost to the accounting periods in which the asset is used.

    depreciation

    This is the systematic allocation of a plant asset’s cost to expense over the useful life of the asset in order to match an asset’s cost to the accounting periods in which the asset is used.

  • assets

    These are a company’s resources that have a future economic value that can be measured and reported in the company’s currency.

    assets

    These are a company’s resources that have a future economic value that can be measured and reported in the company’s currency.

  • liabilities

    These are a company’s obligations and one of the main elements of the balance sheet. They normally have a credit balance which will carry forward to the next accounting year.

    liabilities

    These are a company’s obligations and one of the main elements of the balance sheet. They normally have a credit balance which will carry forward to the next accounting year.

  • asset account

    This is a general ledger record used to record a company’s resource that has a future economic value. It normally has a debit balance which will carry forward to the next accounting year.

    asset account

    This is a general ledger record used to record a company’s resource that has a future economic value. It normally has a debit balance which will carry forward to the next accounting year.

  • contra asset account

    This type of general ledger asset account will likely have a credit balance. Examples include Accumulated Depreciation and Allowance for Doubtful Accounts.

    contra asset account

    This type of general ledger asset account will likely have a credit balance. Examples include Accumulated Depreciation and Allowance for Doubtful Accounts.

  • liability account

    This is a general ledger record used to record a company’s obligations including deferred revenues. Its normal balance is a credit which will carry forward to the next accounting year.

    liability account

    This is a general ledger record used to record a company’s obligations including deferred revenues. Its normal balance is a credit which will carry forward to the next accounting year.

  • contra liability account

    This type of general ledger liability account will have a debit balance. An example is Discount on Bonds Payable.

    contra liability account

    This type of general ledger liability account will have a debit balance. An example is Discount on Bonds Payable.

  • accounts payable

    This current liability account reports the amounts owed to vendors (suppliers) for goods and/or services that were received on credit.

    accounts payable

    This current liability account reports the amounts owed to vendors (suppliers) for goods and/or services that were received on credit.

  • vendor

    This is another term for supplier.

    vendor

    This is another term for supplier.

  • early payment discount (or) cash discount

    This is another term used for the 1% or 2% sales discount or purchase discount.

    early payment discount (or) cash discount

    This is another term used for the 1% or 2% sales discount or purchase discount.

  • 1/10, net 30

    This invoice term indicates that the net amount (after any return or allowance) is due within 30 days. However, 1% can be deducted if the invoice is paid within 10 days.

    1/10, net 30

    This invoice term indicates that the net amount (after any return or allowance) is due within 30 days. However, 1% can be deducted if the invoice is paid within 10 days.

  • QuickBooks

    This accounting and bookkeeping software from Intuit is widely used by small businesses in the U.S.

    QuickBooks

    This accounting and bookkeeping software from Intuit is widely used by small businesses in the U.S.

  • biweekly

    This word indicates that an employee is paid every two weeks and will result in 26 pay periods each year.

    biweekly

    This word indicates that an employee is paid every two weeks and will result in 26 pay periods each year.

  • semimonthly

    This word indicates that an employee is paid twice per month and will result in 24 pay periods each year.

    semimonthly

    This word indicates that an employee is paid twice per month and will result in 24 pay periods each year.

  • general ledger

    This part of the accounting system contains the balance sheet and income statement accounts in which the amounts from transactions are posted.

    general ledger

    This part of the accounting system contains the balance sheet and income statement accounts in which the amounts from transactions are posted.

  • general journal

    This is often referred to as the book of original entry and it is used for recording adjusting entries.

    general journal

    This is often referred to as the book of original entry and it is used for recording adjusting entries.

  • general ledger account

    This record is used to sort and store transaction amounts. Under double-entry, a minimum of two of these are used when a transaction is posted.

    general ledger account

    This record is used to sort and store transaction amounts. Under double-entry, a minimum of two of these are used when a transaction is posted.

  • subsidiary ledger

    This is a collection of detailed accounts that support the summary amounts in a general ledger control account.

    subsidiary ledger

    This is a collection of detailed accounts that support the summary amounts in a general ledger control account.

  • control account

    This term is used to indicate that a general ledger account has a subsidiary ledger with the supporting amounts.

    control account

    This term is used to indicate that a general ledger account has a subsidiary ledger with the supporting amounts.

  • aging of accounts receivable

    This internal report sorts a company’s accounts receivable by the date of the sales invoice or due date. It is used to monitor the accounts receivable and to estimate the amount of uncollectible accounts.

    aging of accounts receivable

    This internal report sorts a company’s accounts receivable by the date of the sales invoice or due date. It is used to monitor the accounts receivable and to estimate the amount of uncollectible accounts.

  • revenues

    This term describes amounts that have been earned by a company and are reported on the income statement. Examples are sales, fees earned, interest earned.

    revenues

    This term describes amounts that have been earned by a company and are reported on the income statement. Examples are sales, fees earned, interest earned.

  • expenses

    This word describes costs that are being matched with revenues or have been used up during the current accounting period.

    expenses

    This word describes costs that are being matched with revenues or have been used up during the current accounting period.

  • gains

    This term describes positive income statement items resulting from actions outside of a company’s main operating activities. One of these occurs when old equipment is sold for more than its book value.

    gains

    This term describes positive income statement items resulting from actions outside of a company’s main operating activities. One of these occurs when old equipment is sold for more than its book value.

  • losses

    This term describes negative income statement items resulting from actions outside of a company’s main operating activities. One of these occurs when old equipment is sold for less than its book value.

    losses

    This term describes negative income statement items resulting from actions outside of a company’s main operating activities. One of these occurs when old equipment is sold for less than its book value.

  • gross profit (or) gross margin

    This is the result when the cost of goods sold is subtracted from net sales.

    gross profit (or) gross margin

    This is the result when the cost of goods sold is subtracted from net sales.

  • balance sheet (or) statement of financial position

    This financial statement reports a company’s assets, liabilities, and stockholders’ (or owner’s) equity as of the final moment of the accounting period.

    balance sheet (or) statement of financial position

    This financial statement reports a company’s assets, liabilities, and stockholders’ (or owner’s) equity as of the final moment of the accounting period.

  • income statement (or) statement of earnings (or) statement of operations

    This financial statement reports a corporation’s net income for a specified period of time. It includes the amounts of revenues, expenses, gains, and losses. It is also referred to as the P&L.

    income statement (or) statement of earnings (or) statement of operations

    This financial statement reports a corporation’s net income for a specified period of time. It includes the amounts of revenues, expenses, gains, and losses. It is also referred to as the P&L.

  • cash flow statement (or) statement of cash flows

    This financial statement reports the major changes in a corporation’s cash and cash equivalents during a period of time. It is organized according to operating, investing, and financing activities. It also includes supplemental information.

    cash flow statement (or) statement of cash flows

    This financial statement reports the major changes in a corporation’s cash and cash equivalents during a period of time. It is organized according to operating, investing, and financing activities. It also includes supplemental information.

  • inventory

    This current asset reports the cost of a retailer’s or manufacturer’s goods on hand. It also requires a cost flow assumption such as FIFO, LIFO, average, etc.

    inventory

    This current asset reports the cost of a retailer’s or manufacturer’s goods on hand. It also requires a cost flow assumption such as FIFO, LIFO, average, etc.

  • current assets

    This term is defined as cash and other resources that are expected to turn to cash within one year of the balance sheet date (or within the operating cycle if it is longer than one year).

    current assets

    This term is defined as cash and other resources that are expected to turn to cash within one year of the balance sheet date (or within the operating cycle if it is longer than one year).

  • noncurrent assets (or) long-term assets

    These financial resources are not expected to turn to cash within one year of the balance sheet date. An example is the equipment used in a business.

    noncurrent assets (or) long-term assets

    These financial resources are not expected to turn to cash within one year of the balance sheet date. An example is the equipment used in a business.

  • fixed assets (or) property, plant and equipment

    This noncurrent section of the balance sheet reports the assets that are used in a company (buildings, equipment, etc.) and the related accumulated depreciation.

    fixed assets (or) property, plant and equipment

    This noncurrent section of the balance sheet reports the assets that are used in a company (buildings, equipment, etc.) and the related accumulated depreciation.

  • current liabilities

    These obligations are due within one year of the balance sheet date and will use a current asset or create another current liability.

    current liabilities

    These obligations are due within one year of the balance sheet date and will use a current asset or create another current liability.

  • noncurrent liabilities (or) long-term liabilities

    These obligations are not due within one year of the balance sheet date. Examples include bonds payable and the mortgage loan payable.

    noncurrent liabilities (or) long-term liabilities

    These obligations are not due within one year of the balance sheet date. Examples include bonds payable and the mortgage loan payable.

  • cost principle (or) historical cost principle

    This basic underlying principle requires each transaction to be recorded at its cash value at the time of the transaction. It prohibits increasing the recorded amount for property that has increased in value.

    cost principle (or) historical cost principle

    This basic underlying principle requires each transaction to be recorded at its cash value at the time of the transaction. It prohibits increasing the recorded amount for property that has increased in value.

  • matching principle

    This basic underlying principle requires that adjusting entries be recorded in order to accrue and/or defer some expenses.

    matching principle

    This basic underlying principle requires that adjusting entries be recorded in order to accrue and/or defer some expenses.

  • stockholders' equity (or) shareholders' equity

    This section of a corporation’s balance sheet reports the difference between the amount of assets and liabilities. Its main parts are paid-in capital, retained earnings, and treasury stock.

    stockholders' equity (or) shareholders' equity

    This section of a corporation’s balance sheet reports the difference between the amount of assets and liabilities. Its main parts are paid-in capital, retained earnings, and treasury stock.

  • owner's equity

    The total of this section of a sole proprietor’s balance sheet is equal to total assets minus total liabilities.

    owner's equity

    The total of this section of a sole proprietor’s balance sheet is equal to total assets minus total liabilities.

  • bank reconciliation

    This procedure is done to ensure that an organization’s general ledger cash accounts are complete and consistent with the amounts reported by its bank(s). It may result in entries to the general ledger.

    bank reconciliation

    This procedure is done to ensure that an organization’s general ledger cash accounts are complete and consistent with the amounts reported by its bank(s). It may result in entries to the general ledger.

  • petty cash

    This current asset is usually a small amount of currency and coins on hand to pay small amounts without writing a check. It will be replenished when its currency is low and also at the end of each accounting period.

    petty cash

    This current asset is usually a small amount of currency and coins on hand to pay small amounts without writing a check. It will be replenished when its currency is low and also at the end of each accounting period.

  • separation of duties (or) segregation of duties

    This is one of the principles of internal control that requires tasks to involve more than one person so that a company’s resources are less likely to be misappropriated.

    separation of duties (or) segregation of duties

    This is one of the principles of internal control that requires tasks to involve more than one person so that a company’s resources are less likely to be misappropriated.

  • paid-in capital (or) contributed capital

    This section of stockholders’ equity contains the amounts received by a corporation when its shares of stock were originally issued.

    paid-in capital (or) contributed capital

    This section of stockholders’ equity contains the amounts received by a corporation when its shares of stock were originally issued.

  • retained earnings

    Generally, this section of stockholders’ equity reports the cumulative earnings of the corporation minus the cumulative dividends declared since the corporation began.

    retained earnings

    Generally, this section of stockholders’ equity reports the cumulative earnings of the corporation minus the cumulative dividends declared since the corporation began.

  • accrual method of accounting (or) accrual basis of accounting

    This method or basis reports revenues when they are earned (as opposed to when the cash is received) and reports expenses when they occur (as opposed to when they are paid).

    accrual method of accounting (or) accrual basis of accounting

    This method or basis reports revenues when they are earned (as opposed to when the cash is received) and reports expenses when they occur (as opposed to when they are paid).

  • cash method of accounting (or) cash basis of accounting

    This method or basis reports revenues when cash is received (as opposed to when the revenues are earned) and reports expenses when they are paid (as opposed to when they are incurred).

    cash method of accounting (or) cash basis of accounting

    This method or basis reports revenues when cash is received (as opposed to when the revenues are earned) and reports expenses when they are paid (as opposed to when they are incurred).

  • accrue (or) accrual

    This term refers to reporting expenses that have occurred but have not yet been entered in the accounts. It also refers to reporting revenues that have been earned but have not yet been recorded in the accounts.

    accrue (or) accrual

    This term refers to reporting expenses that have occurred but have not yet been entered in the accounts. It also refers to reporting revenues that have been earned but have not yet been recorded in the accounts.

  • defer (or) deferral

    This term refers to delaying the reporting of an expense until a later accounting period when it expires or is used up. It also refers to delaying the reporting of revenues until they are earned in a later accounting period.

    defer (or) deferral

    This term refers to delaying the reporting of an expense until a later accounting period when it expires or is used up. It also refers to delaying the reporting of revenues until they are earned in a later accounting period.

  • reversing entry

    This entry is recorded on the first day of the accounting period following an accrual-type adjusting entry. It is used to avoid double-counting accrued expenses and accrued revenues.

    reversing entry

    This entry is recorded on the first day of the accounting period following an accrual-type adjusting entry. It is used to avoid double-counting accrued expenses and accrued revenues.

  • SG&A (or) selling, general and administrative

    These are a company’s operating expenses other than the cost of goods sold.

    SG&A (or) selling, general and administrative

    These are a company’s operating expenses other than the cost of goods sold.

  • FIFO (or) first in, first out

    This cost flow assumption removes from inventory the oldest cost first and includes them in the cost of goods sold. As a result, the most recent costs remain in inventory.

    FIFO (or) first in, first out

    This cost flow assumption removes from inventory the oldest cost first and includes them in the cost of goods sold. As a result, the most recent costs remain in inventory.

  • LIFO (or) last in, first out

    This cost flow assumption removes from inventory the most recent costs first and includes them in the cost of goods sold. As a result, the older costs remain in inventory.

    LIFO (or) last in, first out

    This cost flow assumption removes from inventory the most recent costs first and includes them in the cost of goods sold. As a result, the older costs remain in inventory.

  • working capital (or) net working capital

    This is defined as current assets minus current liabilities.

    working capital (or) net working capital

    This is defined as current assets minus current liabilities.

  • current ratio

    This results from dividing the amount of current assets by the amount of current liabilities.

    current ratio

    This results from dividing the amount of current assets by the amount of current liabilities.

  • quick ratio (or) acid test ratio

    This results when the sum of a company’s cash + marketable securities + accounts receivable is divided by the amount of current liabilities.

    quick ratio (or) acid test ratio

    This results when the sum of a company’s cash + marketable securities + accounts receivable is divided by the amount of current liabilities.

  • inventory turnover

    This ratio is the result of dividing the cost of goods sold for the year by the average amount of inventory during the year.

    inventory turnover

    This ratio is the result of dividing the cost of goods sold for the year by the average amount of inventory during the year.

  • three-way match

    This technique requires comparing a vendor’s invoice with the company’s purchase order and the company’s receiving report before the invoice is paid.

    three-way match

    This technique requires comparing a vendor’s invoice with the company’s purchase order and the company’s receiving report before the invoice is paid.

  • closing entries

    These entries transfer the end-of-the-year balances from temporary accounts to permanent accounts. For example, the income statement account balances are transferred to an equity account at the end of the accounting year.

    closing entries

    These entries transfer the end-of-the-year balances from temporary accounts to permanent accounts. For example, the income statement account balances are transferred to an equity account at the end of the accounting year.

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