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148 Cards in this Set
- Front
- Back
Accounting |
The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgements. |
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Accrual Accounting
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Accounting that recognizes revenues and expenses as they occur, even though the cash receipt from the revenue or the cash disbursement related to the expense may occur before or after the event that causes revenue or expense recognition. |
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Annual Report |
A document distributed to shareholders and other interested parties that contains the financial statements, notes to the financial statements, and management's discussion and analysis of financial and operating factors that affected the firm together with the report of the external auditor's examination of the financial statements. |
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Auditing |
The process of examining the financial statements of an entity by an independent third party with the objective of expressing an opinion about the fairness of the presentation of the entity's financial position, results of operations, changes in financial position, and cash flows. The practice of auditing is less precisely referred to as public accounting. |
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Bookkeeping |
Procedures that are used to keep track of financial transactions and accumulate the results of an entity's financial activities. |
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Cash Flow |
Cash receipts or disbursements of an entity. |
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Certified Management Accountant |
Professional designation earned by passing a broad, two-part exam and meeting certain experience requirements. Exam topics include budgeting, performance management, cost management, financial statement analysis, corporate finance, decision analysis, and professional ethics. |
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Certified Public Accountant |
A professional designation earned by fulfilling certain education and experience requirements, in addition to passing a comprehensive, four-part exam. Exam topics include financial accounting theory and practice, income tax accounting, managerial accounting, governmental and not-for-profit accounting, auditing, business law, and other aspects of the business environment. |
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Controller |
The chief accounting officer of an organization. Usually responsible for both the financial and managerial accounting functions. Sometimes referred to as comptroller. |
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Cost Accounting |
A subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs. |
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Cost Accounting Standards Board |
A group authorized by the US Congress to establish cost accounting standards for government contractors. |
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Creditor |
An organization or individual who lends to the entity. Examples include suppliers who ship merchandise to the entity prior to receiving payment for their goods and banks that lend cash to the entity. |
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Entity |
An organization, individual, or a group of organizations or individuals for which accounting services are performed. |
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FASB Accounting Standards Codification (FASB Codification) |
An advanced user-accessible computer application that systemized and reorganized many divergent elements of US GAAP into one composite structure permitting users to review, study and research topics. The Codification presents US GAAP in a uniform and logical order, with approximately 90 major accounting topics. Since July 2009, the FASB Codification has represented a single source of all US GAAP. |
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Financial Accounting |
Accounting that focuses on reporting an entity's financial position at a point in time and/or its results of operations and cash flows for a period of time. |
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Financial Accounting Foundation |
An organization composed of people from the public accounting profession, businesses, and the public that is responsible for the funding of and appointing members to the Financial Accounting Standards Board and the Governmental Accounting Standards Board. |
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Financial Accounting Standards Board (FASB) |
The body responsible for establishing US generally accepted accounting principles. |
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Generally Accepted Accounting Principles (GAAP) |
Pronouncements of the Financial Accounting Standards Board (FASB) and its predecessors that constitute appropriate accounting for various transactions used for reporting financial position and results of operations to investors and creditors. Since July 2009, the FASB Codification has represented a single source of US GAAP. |
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Generally Accepted Auditing Standards (GAAS) |
Standards for auditing that are established by the Auditing Standards Board of the American Institute of Certified Public Accountants unless superseded or amended by the PCAOB. |
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Governmental Accounting Standards Board (GASB) |
Generally accepted auditing standards (GASS |
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Independence |
The personal characteristic of an accountant, especially an auditor, that refers to both appearing and in fact being objective and impartial. |
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Independent Auditor's Report |
The report accompanying audited financial statements that explains briefly the auditor's responsibility and the extent of work performed. The report includes an opinion about whether the information contained in the financial statements is presented fairly in accordance with generally accepted accounting principles. |
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Integrity |
The personal characteristic of honesty, including being forthright in dealings and communications with others. |
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Internal auditing |
The practice of auditing within a company by employees of the company. |
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International Accounting Standards Board (IASB) |
Standard-setting body responsible for the development of International Financial Reporting Standards (IFRS), permitted or required by more than 100 countries. |
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International Financial Reporting Standards (IFRS) |
Pronouncements of the International Accounting Standards Board that are considered to be a "principles-based" set of standards in that they establish broad rules as well as dictating specific treatments. Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). |
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Investor |
An organization or individual who has an ownership interest in the firm. For corporations, referred to as stockholder or shareholder. |
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Managerial Accounting |
Accounting that is concerned with the internal use of economic and financial information to plan and control many of the activities of an entity and to support the management decision-making process. |
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Objectivity |
The personal characteristic of impartiality, including freedom from conflict of interest. |
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Public Accounting |
The segment of the accounting profession that provides auditing, income tax accounting, and management consulting services to clients. |
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Public Company Accounting Oversight Board (PCAOB) |
Established in 2002 with authority to set and enforce auditing and ethics standards for public companies and their auditing firms; affiliated with the SEC. |
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Securities and Exchange Commission (SEC) |
A unit of the federal government that is responsible for establishing regulations and ensuring full disclosure to investors about companies and their securities that are traded in interstate commerce. |
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Statements of Financial Accounting Standards (SFAS) |
Pronouncements of the Financial Accounting Standards Board that formerly constituted generally accepted accounting principles. Effective in July 2009, the SFAS series was superseded by the FASB Accounting Standards Codification.
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Account |
A record in which transactions affecting individual assets, liabilities, stockholders' equity, revenues, and expenses are recorded. |
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Accounting Equation |
Assets = Liabilities + Stockholders' Equity (A=L+SE). The fundamental relationship represented by the balance sheet and the foundation of the bookkeeping process. |
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Accounts payable |
A Liability representing an amount payable to another entity, usually because of the purchase of merchandise or services on credit. |
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Accounts Receivable |
An asset representing a claim against another entity, usually arising from selling goods or services on credit. |
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Accrued Liabilities |
Amounts that are owed by an entity on the balance sheet date. |
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Accumulated Depreciation |
The sum of the depreciation expense that has been recognized over time. A contra-asset (an amount that is subtracted from the cost of the related asset on the balance sheet). |
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Additional Paid-in Capital |
The excess of the amount received from the sale of stock over the par value of the shares sold. |
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Assets Probable |
Future economic benefits obtained or controlled by an entity as a result of past transactions or events. |
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Balance Sheet |
The financial statements that is a listing of teh entity's assets, liabilities, and stockholders' equity at a point in time. Sometimes this statement is called teh statement of financial position. |
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Balance Sheet Equation |
Another term for accounting equation. |
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Cash |
An asset on the balance sheet that represents the amount of of cash on hand and balances in bank accounts maintained by the entity. |
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Common Stock |
The class of stock that represents residual ownership of the corporation. |
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Corporation |
A form of organization in which ownership is evidenced by shares of stock owned by stockholders; its features, such as limited liability of the stockholders, make this the principal form of organization for most business activity. |
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Cost of Goods Sold |
Cost of merchandise sold during the period; an expense deducted from net sales to arrive at gross profit. Frequently used synonyms are cost of sales and cost of products sold. |
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Current Assets |
Cash and those assets that are likely to be converted to cash or used to benefit the entity within one year of the balance sheet date. |
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Current Liabilities |
Those liabilities due to be paid within one year of the balance sheet date. |
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Depreciation |
The accounting process of recognizing the cost of an asset that is used up over its useful life to the entity. |
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Depreciation Expense |
The expense recognized in a fiscal period for the depreciation of an asset. |
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Divident |
A distribution of earnings to the stockholders of a corporation. |
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Earnings per Share of Common Stock Outstanding |
Net income available to the common stockholders divided by the average number of shares of common stock outstanding during the period. Usually referred to simply as EPS. |
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Equity |
The ownership right associated with an asset. |
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Expenses |
Outflows or other using up of assets or incurring a liability during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's major operations. |
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Fiscal Year |
The annual period used for reporting to owners. |
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Gains |
Increases in net assets from incidental transactions that are not revenues or investments by owners. |
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Going Concern Concept |
A presumption that the entity will continue existence for the indefinite future. |
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Gross Profit |
Net sales less cost of goods sold. Sometimes called gross margin. |
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Income from Operations |
The difference between gross profit and operating expenses. Also referred to as operating income. |
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Income Statement |
The financial statement that summarized the entity's revenues, expenses, gains, and losses for a period of time and thereby reports the entity's results of operations for that period of time. |
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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. |
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Losses |
Decreases in net assets from incidental transactions that are not expenses or distributions to owners. |
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Matching Concept |
The concept that expenses incurred in generating revenues should be deducted from reveues earned during the period for which results are being reported. |
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Merchandise Inventory |
Items held by an entity for sale to customers in the normal course of business. |
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Net Assets |
The difference between assets and liabilities; also referred to as stockholders' equity or owners' equity. |
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Net Income |
The excess of revenues and gains over expenses and losses for a fiscal period. |
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Net Sales |
Gross sales, less sales discounts and sales returns and allowances. |
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Net Worth |
Another term for net assets or stockholders' equity or owners' equity, but not as appropriate because the term worth may be misleading. |
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Opportunity Cost |
An economic concept relating to income forgone because an opportunity to earn income was not pursued. |
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Owners' Equity |
Another term for stockholders' equity. The owners' claim in the assets of the entity. Sometimes called net assets; the difference between assets and liabilities. |
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Paid in Capital |
The amount invested in the entity by the stockholders. |
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Par Value |
An arbitrary value assigned to a share of stock when the corporation is organized. Sometimes used to refer to the stated value or face amount of a security. |
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Partnership |
A form of organization indicating ownership by two or more individuals or corporations without the limited liability and other features of a corporation. |
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Profit |
The excess of revenues and gains over expenses and losses for a fiscal period; another term for net income. |
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Profit and Loss Statement |
Another term for income statement. |
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Proprietorship |
A form of organization indicating individual ownership without the limited liability and other features of a corporation. |
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Retained Earning |
Cumulative net income that has not been distributed to the stockholders of a corporation as dividends. |
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Revenues |
Inflows of cash or increases in other assets, or the settlement of liabilities during a period, from delivering or producing gods, redering services, or performing other activities that constitute the entity's major operations. |
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Statement of Cash Flows |
The financial statement that explains why cash changed during a fiscal period. Cash flows from operating, investing, and financing activities are shown. |
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Statement of Changes in Capital Stock |
The financial statement that summarizes changes during a fiscal period in capital stock and additional paid-in capital. This information may be included in the statement of changes in stockholders' equity. |
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Statement of Changes in Retained Earnings |
The financial statement that summarizes the changes during a fiscal period in retained earnings. This information may be included in the statement of changes in stockholders' equity.
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Statement of Earnings |
Another term for income statement; it shows the revenues, expenses, gains, and losses for a period of time and thereby the entity's results of operations for that period of time. |
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Statement of Financial Position |
Another term for balance sheet; a listing of the entity's assets, liabilities, and stockholders' equity at a point in time. |
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Statement of Pperations |
Another term for income statement |
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Stock |
The evidence of ownership of a corporation. |
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Stockholders' Equity |
The stockholders' claim in the assets of the entity. Sometimes called owners' equity or net assets; the difference between assets and liabilities. |
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Subsidiary |
A corporation whose stock is more than 50 percent owned by another corporation. |
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Transactions |
Economic interchanges between entities that are accounted for and reflected in financial statements. |
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Account Balance |
The arithmetic sum of the additions and subtractions to an account through a given date. |
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Accrual |
The process of recognizing revenue that has been earned but not collected, or an expense that has been incurred but not paid. |
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Accrued |
Describes revenue that has been earned and a related asset that will be collected, or an expense that has been incurred and a related liability that will be paid. |
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Adjustment |
An entry usually made during the process of "closing the books" that results in more accurate financial statements. Adjustments involve accruals and re-classifications. Adjustments are sometimes made at the end of interim periods, such as month-end or quarter-end, as well. |
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Charge |
In bookkeeping, a synonym for debit. |
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Chart of Accounts |
An index of the accounts contained in a ledger. |
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Closing the Books |
The process of posting transactions, adjustments, and closing entries to the ledger and preparing the financial statements. |
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Credit |
The right side of an account. A decrease in asset and expense accounts; an increase in liability, stockholders' equity, and revenue accounts. |
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Debit |
The left side of an account. An increase in asset and expense accounts; a decrease in liability, stockholders' equity, and revenue accounts. |
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Entry |
A journal entry or a posting to an account. |
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Horizontal Model |
A representation of the balance sheet and income statement relationship that is useful for understanding the effects of transactions and adjustments on the financial statements. |
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Journal |
A chronological record of transactions. |
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Journal Entry |
A description of a transaction in a format that shows the debit account(s) and amount(s) and credit account(s) and amount(s). |
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Ledger |
A book or file of accounts. |
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On Account |
Used to describe a purchase or sale transaction for which cash will be paid or received at a later date. A "credit" transaction. |
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Post |
The process of recording a transaction in the respective ledger accounts using a journal entry as the source of the information recorded.
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Source Document
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Evidence of a transaction that supports the journal entry recording the transaction. |
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T-Account |
An account format with a debit (left) side and a credit (right) side. |
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Transaction Analysis Methodology |
The process of answering 5 questions to ensure that a transaction is understood: 1. What is going on? 2. What accounts are affected? 3. How are they affected? 4. Does the balance sheet balance? (Do the debits equal the credits?) 5. Does my analysis make sense? |
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Administrative controls |
Features of the internal control system that emphasize adherence to management's policies and operating efficiency. |
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Allowance for Uncollectible Accounts (or Allowance for Bad Debts) |
The valuation allowance that results in accounts receivable being reduced by the amount not expected to be collected. |
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Bad Debts Expense (or Uncollectible Accounts Expense) |
An estimated expense, recognized in the fiscal period of the sale, representing accounts receivable that are not expected to be collected. |
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Bank Reconcilliation |
The process of bringing into agreement the balance in the cash account in the company's ledger and the balance reported by the bank on the bank statement. |
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Bank Service Charge |
The fee charged by a bank for maintaining the company's checking account. |
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Carrying Value |
The balance of the ledger account (net of related contra accounts, if any) of an asset, liability, or stockholders' equity account. Sometimes referred to as book value. |
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Cash |
A company's most liquid asset; includes money in change funds, petty cash, undeposited receipts such as currency, checks, bank drafts, and money orders, and funds immediately available in bank accounts. |
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Cash Discount |
A discount offered for prompt payment. |
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Cash Equivalents |
Short-term, highly liquid investments that can be readily converted into cash with a minimal risk of price change due to interest rate movements; examples include US Treasury securities, bank CDs, money market funds, and commercial paper. |
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Collateral |
Assets of a borrower that can be used to satisfy the obligation if payment is not made when due. |
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Collection on Delivery |
A requirement that an item be paid for when it is delivered. Sometimes COD is defined as "cash" on deliver. |
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Commercial Paper |
A short-term security usually issued by a large, creditworthy corporation. |
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Contra Asset |
An account that normally has a credit balance that is subtracted from a related asset on the balance sheet. |
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Cost Flow Assumption |
As assumption made for accounting purposes that identifies how costs flow from the Inventory account to teh Cost of Goods Sold amount. Alternatives include specific identification; weighted average; first-in, first-out; and last-in, first-out. |
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Cost of Goods Sold Model |
The way to calculate cost of goods sold when the periodic inventory system is used. The model is: Beginning Inventories + Purchases - Ending Inventory
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Credit Terms |
A seller's policy with respect to when payment of an invoice is due and what cash discount (if any) is allowed. |
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Deferred Charge |
An expenditure made in one fiscal period that will be recognized as an expense in a future fiscal period. Another term for a prepaid expense. |
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Deposit in Transit |
A bank deposit that has been recorded in the company's cash account but that does not appear on the bank statement because the bank received the deposit after the date of the statement. |
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Financial Controls |
Features of the internal control system that emphasize accuracy of bookkeeping and financial statements and protection of assets. |
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Finished Goods Inventory |
The term used primarily by manufacturing firms to describe inventory ready for sale to customers. |
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FIFO |
The inventory cost flow assumption that the first costs in to inventory are the first costs out to cost of goods sold. |
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Imprest Account |
An asset account that has a constant balance int eh ledger; cash on hand and vouchers (as receipts for payments) add up to the account balance. Used especially for petty cash funds. |
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Internal Control System |
Policies and procedures designed to provide reasonable assurance that objectives are achieved with respect to: -The effectiveness and efficiency of the operations of the organization -The reliability of the organization's financial reporting -The organization's compliance with applicable laws and regulations. |
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Inventory Accounting System |
The method used to account for the movement of items in to inventory and out to cost of goods sold. The alternatives are the periodic system and the perpetual system. |
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Inventory Profits |
Profits that result from using the FIFO cost flow assumption rather than LIFO during periods of inflation. Sometimes called phantom profits. |
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LIFO |
The inventory cost flow assumption that the last costs in to inventory are the first costs out to cost of goods sold. |
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Lower of Cost or Market
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A valuation process that may result in an asset being reported at an amount less than cost. |
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Merchandise Inventory |
The term used primarily by retail firms to describe inventory ready for sale to customers. |
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Net Realizable Value |
The amount of funds expected to be received upon sale or liquidation of an asset. For accounts receivable, the amount expected to be collected from customers after allowing for bad debts and estimated cash discounts. |
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Note Receivable |
A formal document (usually interest bearing) that supports the financial claim of one entity against another. |
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NSF (Not Sufficient Funds) check |
A check returned by the maker's bank because there were not enough funds in the account to cover the check. |
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Operating Cycle |
The average time needed for a firm to convert an amount invested in inventory back to cash. For most firms, the operating cycle is measured as the average number of days to produce and sell inventory, plus the average number of days to collect accounts receivable. |
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Outstanding Check |
A check that has been recorded as a cash disbursement by the company but that has not yet been processed by the bank. |
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Periodic Inventory System |
A system of accounting for the movement of items in to inventory and out to cost of goods sold that involves periodically making a physical count of the inventory on hand. |
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Perpetual Inventory System
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A system of accounting for the movement of items in to inventory and out to cost of goods sold that involves keeping a continuous record of items received, items sold, inventory on hand, and cost of goods sold. |
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Petty Cash |
A fund used for small payments which writing a check is inconvenient. |
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Physical Inventory |
The process of counting the inventory on hand and determining its cost based on the inventory cost flow assumption being used. |
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Prepaid Expenses |
Expenses that have been paid int he current fiscal period but that will not be subtracted from revenues until a subsequent fiscal period when the benefits are received. Usually a current asset. Another term for deferred charge. |
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Prepaid Insurance |
An asset account that represents an expenditure made in one fiscal period for insurance that will be recognized as an expense in a subsequent fiscal period to which the coverage applies. |
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Raw Materials Inventory |
An asset account that accumulates the costs of materials ready for the production process. |