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Accounting Terminology - NAHID - 05-26-2006
Accelerated Depreciation - Method that records greater DEPRECIATION than STRAIGHT-LINE DEPRECIATION in the early years and less depreciation than straight-line in the later years of an ASSET'S holding period.
Account - Formal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.
Account Payable - Amount owed to a CREDITOR for delivered goods or completed services.
Account Receivable - Claim against a DEBTOR for an uncollected amount, generally from a completed transaction of sales or services rendered.
Accountable Plan - An accountable plan is any reimbursement or other expense allowance arrangement of an employer that meets all of the following requirements (therefore excluding it from gross w-2 earned income and tax) (1) it provides reimbursements advances or allowances including per diem and meals, to employees for any job related deductible business expense; (2) employees must be able to substantiate expenses covered in the plan; (3) employee must return any excess advances or payments.
Accountant - Person skilled in the recording and reporting of financial transactions.
Accountants' Report - Formal document that communicates an independent accountant's (1) expression of limited assurance on FINANCIAL STATEMENTS as a result of performing inquiry and analytic procedures (Review Report); (2) results of procedures performed (Agreed-Upon Procedures Report); (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management (Compilation Report); or (4) an opinion on an assertion made by management in accordance with the Statements on Standards for Attestation Engagements (Attestation Report). An accountants' report does not result from the performance of an AUDIT.
Accounting - Recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the FINANCIAL STATEMENTS.
Accrual Basis - Method of ACCOUNTING that recognizes REVENUE when earned, rather than when collected. Expenses are recognized when incurred rather than when paid.
Accumulated Depreciation - Total DEPRECIATION pertaining to an ASSET or group of assets from the time the assets were placed in services until the date of the FINANCIAL STATEMENT or tax return. This total is the CONTRA ACCOUNT to the related asset account.
Additional Paid in Capital - Amounts paid for stock in excess of its PAR VALUE or STATED VALUE. Also, other amounts paid by stockholders and charged to EQUITY ACCOUNTS other than CAPITAL STOCK.
Adjusting Journal Entry - An accounting entry made into a subsidiary ledger called the General journal to account for a periods changes, omissions or other financial data required to be reported "in the books" but not usually posted to the journals used for typical period transactions (the cash receipts journal, cash disbursements journal, the payroll journal, sales journal and so on) the entry is posted to the general ledger accounts directly and usually will be numbered itself, dated and have an explanation. Example AJE# 1 12-31-2003, debit Cash in bank $1,000. Credit interest income $1,000, to record interest income on business bank account at year end, not recorded in cash receipts journal but credited by the bank. (Cross-reference bank reconciliation and account where it was found)
Annuity - Series of payments, usually payable at specified time intervals.
Auditor - Person who AUDITS financial accounts and records kept by others. Includes both public accounting firms registered with the PCAOB and associated persons thereof.
Auditors' Report - Written communication issued by an independent CERTIFIED PUBLIC ACCOUNTANT (CPA) describing the character of his or her work and the degree of responsibility taken. An auditors' report includes a statement that the AUDIT was conducted in accordance with GENERALLY ACCEPTED AUDITING STANDARDS (GAAS), which require that the AUDITOR plan and perform the audit to obtain reasonable assurance about whether the FINANCIAL STATEMENTS are free of material misstatement, as well as a statement that the auditor believes the audit provides a reasonable basis for his or her opinion
Bad Debt - All or portion of an ACCOUNT, loan, or note receivable considered to be uncollectible.
Balance - Sum of DEBIT entries minus the SUM of CREDIT entries in an ACCOUNT. If positive, the difference is called a DEBIT BALANCE; if negative, a CREDIT BALANCE.
Balance Sheet - Basic FINANCIAL STATEMENT, usually accompanied by appropriate DISCLOSURES that describe the basis of ACCOUNTING used in its preparation and presentation of a specified date the entity's ASSETS, LIABILITIES and the EQUITY of its owners. Also known as a STATEMENT OF FINANCIAL CONDITION.
Book Value - Amount, net or CONTRA ACCOUNT balances, that an ASSET or LIABILITY shows on the BALANCE SHEET of a company. Also known as CARRYING VALUE.
Budget - Financial plan that serves as an estimate of future cost, REVENUES or both.
Carrying Value - Amount, net or CONTRA ACCOUNT balances, that an ASSET or LIABILITY shows on the BALANCE SHEET of a company. Also known as BOOK VALUE.
Cash Basis - Method of bookkeeping by which REVENUES and EXPENDITURES are recorded when they are received and paid.
Cash Flows - Net of cash receipts and cash disbursements relating to a particular activity during a specified accounting period.
Contingent Liability - Potential LIABILITY arising from a past transaction or a subsequent event.
Cost Accounting - Procedures used for rationally classifying, recording, and allocating current or predicted costs that relate to a certain product or production process.
Credit - Entry on the right side of a DOUBLE-ENTRY BOOKKEEPING system that represents the reduction of an ASSET or expense or the addition to a LIABILITY or REVENUE.
Credit Agreement - Arrangement in which one party borrows or takes possession in the present by promising to pay in the future.
Credit Balance - BALANCE remaining after one of a series of bookkeeping entries. This amount represents a LIABILITY or income to the entity.
Creditor - Party that loans money or other ASSETS to another party.
Current Asset - ASSET that one can reasonably expect to convert into cash, sell, or consume in operations within a single operating cycle, or within a year if more than one cycle is completed each year.
Current Liability - Obligation whose LIQUIDATION is expected to require the use of existing resources classified as CURRENT ASSETS, or the creation of other current liabilities.
Current Value - (1) Value of an ASSET at the present time as compared with the asset's HISTORICAL COST. (2) In finance, the amount determined by discounting the future revenue stream of an asset using COMPOUND INTEREST PRINCIPLES.
Debit - Entry on the left side of a DOUBLE-ENTRY BOOKKEEPING system that represents the addition of an ASSET or expense or the reduction to a LIABILITY or REVENUE.
Debit Balance - BALANCE remaining after one or a series of bookkeeping entries. This amount represents an ASSET or an expense of the entity.
Debt - General name for money, notes, BONDS, goods or services which represent amounts owed
Debtor - Party owing money or other ASSETS to a CREDITOR.
Deficit - Financial shortage that occurs when LIABILITIES exceed ASSETS.
Depreciation - Expense allowance made for wear and tear on an ASSET over its estimated useful life.
Discount - Reduction from the full amount of a price or DEBT.
Discount Rate - Rate at which INTEREST is deducted in advance of the issuance, purchasing, selling, or lending of a financial instrument. Also, the rate used to determine the CURRENT VALUE, or present value, of an ASSET or income stream.
Distribution Expense - Expense of selling, advertising, and delivery of goods and services.
Double-Entry Bookkeeping - Method of recording financial transactions in which each transaction is entered in two or more accounts and involves two-way, self-balancing posting. Total DEBITS must equal total CREDITS.
Due Date - Each governing agency and its forms scheduled reporting and most importantly payments have a required due date. It is this date that if most files timely may result in a penalty, fine, and commence interest charges.
Earned Income - Wages, salaries, professional fees, and other amounts received as compensation for services rendered.
Equity - Residual INTEREST in the ASSETS of an entity that remains after deducting its LIABILITIES. Also, the amount of a business' total assets less total liabilities. Also, the third section of a BALANCE SHEET, the other two being assets and liabilities.
Equity Account - ACCOUNT in the EQUITY section of the BALANCE SHEET. Includes CAPITAL STOCK, ADDITIONAL PAID IN CAPITAL and RETAINED EARNINGS.
Excise Tax - Tax or duty on the manufacture, sale, or consumption of commodities
Face Value - Amount due at maturity from a BOND or note.
Factoring - Selling a RECEIVABLE at a discounted value to a third party for cash
Financial Statements - Presentation of financial data including BALANCE SHEETS, INCOME STATEMENTS and STATEMENTS OF CASH FLOW, or any supporting statement that is intended to communicate an entity's financial position at a point in time and its results of operations for a period then ended.
First in, First out (FIFO) - ACCOUNTING method of valuing INVENTORY under which the costs of the first goods acquired are the first costs charged to expense. Commonly known as FIFO.
Fiscal Year - Period of 12 consecutive months chosen by an entity as its ACCOUNTING period which may or may not be a calendar year. Fixed Asset - Any tangible ASSET with a life of more than one year used in an entity's operations.
Fraud - Willful misrepresentation by one person of a fact inflicting damage on another person.
General Ledger - Collection of all ASSET, LIABILITY, owners EQUITY, REVENUE, and expense accounts.
Goodwill - Premium paid in the acquisition of an entity over the fair value of its identifiable tangible and intangible ASSETS less LIABILITIES assumed.
Guarranty - Legal arrangement involving a promise by one person to perform the obligations of a second person to a third person, in the event the second person fails to perform.
Income - Inflow of REVENUE during a period of time.
Income Statement - Summary of the effect of REVENUES and expenses over a period of time.
Insolvent - When an entity's LIABILITIES exceed its ASSETS.
Installment - Partial payment.
Intangible Asset - Asset having no physical existence such as trademarks and patents.
Interest - Payment for the use or forbearance of money.
Internal Audit - AUDIT performed within an entity by its staff rather than an independent certified public accountant.
Internal Control - Process designed to provide reasonable assurance regarding achievement of various management objectives such as the reliability of financial reports.
Inventory - Tangible property held for sale, or materials used in a production process to make a product.
Investment - EXPENDITURE used to purchase goods or services that could produce a return to the investor.
Joint Venture - When two or more persons or organizations gather CAPITAL to provide a product or service. Often carried out as a PARTNERSHIP.
Journal - Any book containing original entries of daily financial transactions.
Lease - Conveyance of land, buildings, equipment or other ASSETS from one person (LESSOR) to another (LESSEE) for a specific period of time for monetary or other consideration, usually in the form of rent.
Leasehold - Property INTEREST a LESSEE owns in the leased property.
Ledger - Any book of accounts containing the summaries of debit and credit entries.
Lessee - Person or entity that has the right to use property under the terms of a LEASE.
Lessor - Owner of property, the temporary use of which is transferred to another (LESSEE) under the terms of a LEASE.
Letter of Credit - Conditional bank commitment issued on behalf of a customer to pay a third party in accordance with certain terms and conditions. The two primary types are commercial letters of credit and standby letters of credit.
Liability - DEBTS or obligations owed by one entity (DEBTOR) to another entity (CREDITOR) payable in money, goods, or services.
Liquid Assets - Cash, cash equivalents, and marketable SECURITIES.
Liquidation - Winding up an activity by distributing its ASSETS to the appropriate parties and settling its DEBTS.
Long-Term Debt - DEBT with a maturity of more than one year from the current date.
Loss - Excess of EXPENDITURES over REVENUE for a period or activity. Also, for tax purposes, an excess of basis over the amount realized in a transaction.
Management Accounting - Reporting designed to assist management in decision-making, planning, and control. Also known as Managerial Accounting.
Net Assets - Excess of the value of SECURITIES owned, cash, receivables, and other ASSETS over the LIABILITIES of the company.
Net Income - Excess or DEFICIT of total REVENUES and GAINS compared with total expenses and losses for an ACCOUNTING period.
Net Sales - Sales at gross invoice amounts less any adjustments for returns, allowances, or discounts taken.
Net Worth - Similar to EQUITY, the excess of ASSETS over LIABILITIES.
Paid in Capital - Portion of the stockholders' EQUITY which was paid in by the stockholders, as opposed to CAPITAL arising from profitable operations.
Partnership - Relationship between two or more persons based on a written, oral, or implied agreement whereby they agree to carry on a trade or business for profit and share the resulting profits. Unlike a CORPORATION'S shareholders, the partnership's general partners are liable for the DEBTS of the partnership.
Par Value - Amount per share set in the ARTICLES OF INCORPORATION of a CORPORATION to be entered in the CAPITAL STOCKS account where it is left permanently and signifies a cushion of EQUITY capital for the protection of CREDITORS.
Premium - (1) Excess amount paid for a BOND over its face amount. (2) In insurance, the cost of specified coverage for a designated period of time.
Prepaid Expense - Cost incurred to acquire economically useful goods or services that are expected to be consumed in the revenue-earning process within the operating cycle.
Promissory Note - Evidence of a DEBT with specific amount due and interest rate. The note may specify a maturity date or it may be payable on demand. The promissory note may or may not accompany other instruments such as a MORTGAGE providing security for the payment thereof.
Proprietorship - Business owned by an individual without the limited liability protection of a CORPORATION or a LIMITED LIABILITY COMPANY (LLC). Also known as sole proprietorship.
Receivables - Amounts of money due from customers or other DEBTORS.
Reconciliation - Comparison of two numbers to demonstrate the basis for the difference between them.
Redemption Value - Price to be paid by an ENTITY to retire its BONDS or PREFERRED STOCK.
Repairs - EXPENDITURES made in order to keep property in good condition but that do not appreciably prolong the life or increase the value of the property.
Reserve - ACCOUNT used to earmark a portion of EQUITY or fund balance to indicate that it is not available for expenditure. An obsolete term in the United States. More commonly used in Europe.
Retained Earnings - Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.
Security - Any kind of transferable certificate of ownership including EQUITY SECURITIES and DEBT SECURITIES.
Tangible Asset - ASSETS having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process.
Tax - Charge levied by a governmental unit on income, consumption, wealth, or other basis.
Tax Year - The period used to compute a taxpayer's TAXABLE INCOME is tax year. It is an annual period that is either a calendar year , FISCAL YEAR or fractional part of a year for which the return is made.
Taxable Income - Taxable income is generally equal to a taxpayer's ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.
Variance - Deviation or difference between an estimated value and the actual value.
Withholding - Amount withheld or deducted from employee salaries by the employer and paid by the employer, for the employee, to the proper authority.
Working Capital - Excess of CURRENT ASSETS over CURRENT LIABILITIES
Work in Progress - INVENTORY account consisting of partially completed goods awaiting completion and transfer to finished inventory.
- Muhammad Ahmad - 05-26-2006
AoA
Dear Nahid! i m unable to understande ,why did u posted all this here? would u plz let me now?
Regards
- accountant1 - 05-27-2006
hmm good work ,, mightbe help full for new accounting students
- maani - 05-27-2006
a good copy paste work...
- rizwantariq - 06-03-2006
hi, wht? is purpose of this r u new accounting feild
- inayat - 06-03-2006
Nice Job . Go ahead