account form
The form of balance sheet that resembles the basic format of the accounting equation, with assets on the left side and Liabilities and Owner’s Equity sections on the right side.
account payable
The liability created by a purchase on account.
account receivable
A claim against the customer created by selling merchandise or services on credit.
accounting
An information system that provides reports to stakeholders about the economic activities and condition of a business.
accounting equation
Assets = Liabilities + Owner’s Equity.
assets
The resources owned by a business.
balance sheet
A list of the assets, liabilities, and owner’s equity as of a specific date, usually at the close of the last day of a month or a year.
business
An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.
business entity concept
A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business.
business transaction
An economic event or condition that directly changes an entity’s financial condition or directly affects its results of operations.
Certified Public Accountant (CPA)
Public accountants who have met a state’s education, experience, and examination requirements.
corporation
A business organized under state or federal statutes as a separate legal entity.
cost concept
A concept of accounting that determines the amount initially entered into the accounting records for purchases.
earnings
Used to describe when revenues exceed expenses. (Also see net income and net profits)
ethics
Moral principles that guide the conduct of individuals.
expenses
Assets used up or services consumed in the process of generating revenues.
fees earned
Revenue from providing services.
financial accounting
The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.
Financial Accounting Standards Board (FASB)
The authoritative body that has the primary responsibility for developing accounting principles.
financial statements
Financial reports that summarize the effects of events on a business.
general-purpose financial statements
A type of financial accounting report that is distributed to external users. The term “general purpose†refers to the wide range of decision-making needs that the reports are designed to serve.
generally accepted accounting principles (GAAP)
Generally accepted guidelines for the preparation of financial statements.
income statement
A summary of the revenue and expenses for a specific period of time, such as a month or a year.
interest revenue
Money received for interest.
International Accounting Standards Board (IASB)
An organization that issues International Financial Reporting Standards for many countries outside the United States.
liabilities
The rights of creditors that represent debts of the business.
limited liability company (LLC)
A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners, yet treated as a partnership for tax purposes.
management (or managerial) accounting
The branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies.
manufacturing business
A type of business that changes basic inputs into products that are sold to individual customers.
matching concept (or matching principle)
A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.
merchandising business
A type of business that purchases products from other businesses and sells them to customers.
net income or net profit
The amount by which revenues exceed expenses.
net loss
The amount by which expenses exceed revenues.
objectivity concept
A concept of accounting that requires accounting records and the data reported in financial statements to be based on objective evidence.
owner’s equity
The owner’s right to the assets of the business.
partnership
An unincorporated business form consisting of two or more persons conducting business as co-owners for profit.
prepaid expenses
Items such as supplies that will be used in the business in the future.
private accounting
The field of accounting whereby accountants are employed by a business firm or a not-for-profit organization.
profit
The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services.
proprietorship
A business owned by one individual.
public accounting
The field of accounting where accountants and their staff provide services on a fee basis.
rent revenue
Money received for rent.
revenues
Increases in owner’s equity as a result of selling services or products to customers.
sales
The total amount charged customers for merchandise sold, including cash sales and sales on account.
Securities and Exchange Commission (SEC)
An agency of the U.S. government that has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public.
service business
A business providing services rather than products to customers.
statement of cash flows
A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.
statement of owner’s equity
A summary of the changes in owner’s equity that have occurred during a specific period of time, such as a month or a year.
unit of measure concept
A concept of accounting requiring that economic data be recorded in dollars.
account
An accounting form that is used to record the increases and decreases in each financial statement item.
account receivable
A claim against the customer created by selling merchandise or services on credit.
assets
The resources owned by a business.
balance of the account
The amount of the difference between the debits and the credits that have been entered into an account.
capital account
An account used for a proprietorship that represents the owner’s equity.
chart of accounts
A list of the accounts in the ledger.
correcting journal entry
An entry that is prepared when an error has already been journalized and posted.
credits
Amounts entered on the right side of an account.
debits
Amounts entered on the left side of an account.
double-entry accounting system
A system of accounting for recording transactions, based on recording increases and decreases in accounts so that debits equal credits.
drawing
The account used to record amounts withdrawn by an owner of a proprietorship.
expenses
Assets used up or services consumed in the process of generating revenues.
horizontal analysis
Financial analysis that compares an item in a current statement with the same item in prior statements.
journal
The initial record in which the effects of a transaction are recorded.
journal entry
The form of recording a transaction in a journal.
journalizing
The process of recording a transaction in the journal.
ledger
A group of accounts for a business.
liabilities
The rights of creditors that represent debts of the business.
normal balance of an account
The normal balance of an account can be either a debit or a credit depending on whether increases in the account are recorded as debits or credits.
owner’s equity
The owner’s right to the assets of the business.
posting
The process of transferring the debits and credits from the journal entries to the accounts.
revenues
Increases in owner’s equity as a result of selling services or products to customers.
rules of debit and credit
In the double-entry accounting system, specific rules for recording debits and credits based on the type of account.
slide
An error in which the entire number is moved one or more spaces to the right or the left, such as writing $542.00 as $54.20 or $5,420.00.
T account
The simplest form of an account.
transposition
An error in which the order of the digits is changed, such as writing $542 as $452 or $524.
trial balance
A summary listing of the titles and balances of accounts in the ledger.
unadjusted trial balance
A summary listing of the titles and balances of accounts in the ledger prior to the posting of adjusting entries.
unearned revenue
The liability created by receiving revenue in advance.
