Accounting Chapter 1

Retail Merchandising Business
A merchandising business that sells to those who use or consume the goods.
Wholesale Merchandising Business
Buys and resells merchandise primarily to other merchandising businesses.
Corporation
An organization with the legal rights of a person which many persons or other corporations may own.
Share of Stock
Each unit of ownership in a corporation.
Stockholder
The owner of one or more shares of stock.
Perpetual Inventory
An inventory determined by keeping continuous records of increases, decreases, and the balance on hand of each item of merchandise.
Periodic Inventory
A merchandise inventory evaluated at the end of a fiscal period.
Purchase Order
A form requesting that a vendor sell merchandise to a business.
Terms of sale
An agreement between a buyer and a seller about payment for merchandise.
Cash Discount
A deduction that a vendor allows on an invoice amount to encourage prompt payment.
Permanent Accounts
Accounts used to accumulate information from one fiscal period to the next.
Closing Entries
Journal entries used to prepare temporary accounts for a new fiscal period.
Temporary Accounts
Accounts used to accumulate information until it is transferred to the owner's capital account.
Post-Closing Trial Balance
A trial balance prepared after the closing entries are posted.
Financial Accounting
Area of Accounting that focuses on reporting information to external users.
Managerial Accounting
Area of Accounting that focuses on reporting information to internal users.
Financial Ratio
A comparison between two components of financial information.
Ratio Analysis
Calculation and interpretation of a financial ratio.
Vertical Analysis
Reporting an amount on a financial statement as a percentage of another item on the same financial statement.
Return on Sales (ROS)
The ratio of net income to total sales
Fiscal Period
The length of time for which a business summarizes its financial information and reports its financial performance.
Fiscal Year
A fiscal period consisting of twelve consecutive months.
Fiscal Period
The length of time for which a business summarizes its financial information and reports its financial performance.
Fiscal Year
A fiscal period consisting of twelve consecutive months.
Work sheet
A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.
Trial Balance
A proof of the equality of debits and credits in a general ledger.
Adjustments
Changes on a worksheet to update general ledger accounts at the end of a fiscal period.
Balance Sheet
A financial statement that reports the value of a business's assets, liabilities, and owner's equity on a specific date.
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
Net Income
The difference between total revenue and total expenses when total revenue is greater.
Net Loss
The difference between total revenue and total expenses when total expenses are greater.
Adjusting Entries
Journal entries recorded to update general ledger accounts at the end of the fiscal period.