Super Glossary

Above The Line: This term can be applied to many aspects of accounting. It means transactions, assets etc., that are
Account: A section in a ledger devoted to a single aspect of a business (eg. a Bank account, Wages account, O
Account Payable: An amount owed to a supplier for good or services purchased on credit: payment is due within a short
Account Receivable: A current asset representing money due for services performed or merchandise sold on credit.
Account Receivable Turnover: A measure used to determine a company's average collection period for receivables: computed by divid
Accounting: A service activity designed to accumulate, measure, and communicate financial information about econ
Accounting Cycle: This covers everything from opening the books at the start of the year to closing them at the end. I
Accounting Equation: The formula used to prepare a balance sheet: assets = liability + equity .
Accounting Model: The basic accounting assumptions, concepts, principles, and procedures that determine the manner of
Accounting System: The set of manual and computerized procedures and controls that provide for identifying relevant tra
Accounts Payable: An account in the nominal ledger which contains the overall balance of the Purchase Ledger.
Accounts Payable Ledger: A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is
Accounts Receivable: An account in the nominal ledger which contains the overall balance of the Sales Ledger.
Accounts Receivable Ledger: A subsidiary ledger which holds the accounts of a business's customers. A single control account is
Accretive: If a company acquires another and says the deal is 'accretive to earnings', it means that the result
Accrual Basis: Gross income is recognized when earned.
Accrual Method Of Accounting: Most businesses use the accrual method of accounting (because it is usually required by law). When y
Accrual-Basis Accounting: A system of accounting in which revenues and expenses are recorded as they are earned and incurred,
Accruals: If during the course of a business certain charges are incurred but no invoice is received then thes
Accrued Expenses: Expenses that arise through adjusting entries when accounting for unrecorded expenses.
Accrued Liabilities: Liabilities that arise through adjusting entries when accounting for unrecorded liabilities.
Accumulated Depreciation: The total depreciation recorded on an asset since its acquisition: a contra account deducted from th
Accumulated Depreciation Account: This is an account held in the nominal ledger which holds the depreciation of a fixed asset until th
Acid-Test Ratio (Or Quick Ratio): A measure of a firm's ability to meet current liabilities: more restrictive than the current ratio,
Adjusted Gross Income: An individual taxpayer's total income minus deductions (adjustments) for individual retirement plan
Adjusting Entries: Entries required at the end of each accounting period to recognize, on an accrual basis, revenues an
Adjustments To Gross Income: Amounts deducted from the gross income of an individual taxpayer in arriving at adjusted gross incom
Advanced Corporation Tax (ACT): This is corporation tax paid in advance when a limited company issues a dividend. ACT is then deduct
Adverse Opinion: Audit report indicating the auditor believes the overall financial statements are so materially miss
Aging Accounts Receivable: The process of categorizing each account receivable by the number of days it has been outstanding.
Allowance For Noncollectible Accounts: A contra account, deducted from Accounts Receivable, that shows the estimated losses from uncollecti
Allowance Method: The recording of estimated losses due to uncollectible accounts as expenses during the period in whi
Amortization: The depreciation (or repayment) of an (usually) intangible asset (eg. loan, mortgage) over a fixed p
Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a percentage rather than a dollar amount.
Annual Report: A document that summarizes the results of operations and financial status of a company for the past
Annualize: To convert anything into a yearly figure. Eg. if profits are reported as running at £10k a quarter,
Annuity: A series of equal amounts to be received or paid at the end of equal time intervals.
Appropriation Account: An account in the nominal ledger which shows how the net profits of a business (usually a partnershi
Arms-Length Transactions: Business dealings between independent and rational parties who are looking out for their own interes
Arrears: Bills which should have been paid. For example, if you have forgotten to pay your last 3 months rent
Articulation: The interrelationships among the financial statements.
Asset Turnover Ratio: An overall measure of how effectively assets are used during a period: computed by dividing net sale
Assets: Assets represent what a business owns or is due. Equipment, vehicles, buildings, creditors, money in
At Cost: The 'at cost' price usually refers to the price originally paid for something, as opposed to, say, t
Audit: The result of an independent accountant's review of the statements and footnotes to ensure complianc
Audit Committee: Members of a client's board of directors who are responsible for dealing with the external and inter
Audit Report: A report issued by an independent CPA that expresses an opinion about whether the financial statemen
Audit Trail: A list of transactions in the order they occurred.
Authorized Stock: The amount and type of stock that may be issued by a company, as specified in its articles of incorp
Available-For-Sale Securities: Debt and equity securities not classified as trading, held-to-maturity, or equity method securities.
Average Annual Return: The rate of return on investments averaged over a specific period of time(e.g., the last 20 years).
Bad Debt: An uncollectible account receivable.
Bad Debts Account: An account in the nominal ledger to record the value of un-recoverable debts from customers. Real ba
Bad Debts Reserve Account: An account used to record an estimate of bad debts for the year (usually as a percentage of sales).
Balance Sheet: A summary of all the accounts of a business. Usually prepared at the end of each financial year. The
Balancing Charge: When a fixed asset is sold or disposed of, any loss or gain on the asset can be reclaimed against (o
Bank Reconciliation: The process of systematically comparing the cash balance as reported by the bank with the cash balan
Bank Statement: Monthly record of all activity within an account, provided by the bank.
Bankrupt: If an individual or unincorporated company has greater liabilities than it has assets, the person or
Bankruptcy: Situation where a person files with the court to be released from debts. May entail sale of the debt
Banks: Corporations chartered by state or federal government to offer numerous financial services such as c
Basket Purchase: The purchase of two or more assets acquired together at a single price.
Below The Line: This term is applied to items within a business which would not normally be associated with the ever
Bill: A term typically used to describe a purchase invoice (eg. an invoice from a supplier).
Board Of Directors: Individuals elected by the stockholders to govern a corporation.
Bond: A contract between a borrower and a lender in which the borrower promises to pay a specified rate of
Bond Carrying Value: The face value of bonds minus the unamortized discount or plus the unamortized premium.
Bond Discount: The difference between the face value and the sales price when bonds are sold below their face value
Bond Indenture: A contract between a bond issuer and a bond purchaser that specifies the terms of a bond.
Bond Maturity Date: The date at which a bond principal or face amount becomes payable.
Bond Premium: The difference between the face value and the sales price when bonds are sold above their face value
Book Value: The net amount shown in the accounts for an asset, liability, or owners' equity item.
Book Value Per Share: A measure of net worth: computed by dividing stockholders' equity for each class of stock by the num
Bought Ledger: See Purchase Ledger .
Budget: A financial plan that summarizes future income and expenditures over a period of time.
Burn Rate: The rate at which a company spends its money. Example: if a company had cash reserves of $120m and i
Business: An organization operated with the objective of making a profit from the sale of goods or services.
Business Documents: Records of transactions used as the basis for recording accounting entries: includes invoices, check
Business Expenses: Expenses that have been paid or incurred in the course of business and that are ordinary, necessary,
Calendar Year: An entity's reporting year, covering 12 months and ending on December 31.
Callable Bonds: Bonds for which the issuer reserves the right to pay the obligation before its maturity date.
Called-Up Share Capital: The value of unpaid (but issued shares) which a company has requested payment for. See Paid-up Share
Cancelled Check: A check that has been stamped to show it has been paid.
Capital: An amount of money put into the business (often by way of a loan) as opposed to money earned by the
Capital Account: An account in which a proprietor's or partner's interest in a firm is recorded: it is increased by o
Capital Allowances (UK Specific): The depreciation on a fixed asset is shown in the Profit and Loss account, but is added back again f
Capital Assets: See Fixed Assets .
Capital Employed (CE): Gross CE=Total assets, Net CE=Fixed assets plus (current assets less current liabilities).
Capital Expenditure: An expenditure that is recorded as an asset because it is expected to benefit more than the current
Capital Gain: The excess of the selling price over the cost basis when assets, such as securities and other person
Capital Gains Tax: When a fixed asset is sold at a profit, the profit may be liable to a tax called Capital Gains Tax.
Capital Lease: A leasing transaction that is recorded as a purchase by the lessee.
Capital Loss: A negative difference between an asset’s price when bought and its price when or if sold: the oppo
Capital Stock: The portion of a corporation's owners' equity contributed by investors (owners) in exchange for shar
Cash: Coins, currency, money orders, checks, and funds on deposit with financial institutions: the most li
Cash Accounting: This term describes an accounting method whereby only invoices and bills which have been paid are ac
Cash Basis: Gross income is recognized when cash is received.
Cash Book: A journal where a business's cash sales and purchases are entered. A cash book can also be used to r
Cash Disbursements Journal: A special journal in which all cash paid out for supplies, merchandise, salaries, and other items is
Cash Dividend: A cash distribution of earnings to shareholders.
Cash Equivalents: Short-term, highly liquid investments that can be converted easily into cash.
Cash Flow: A report which shows the flow of money in and out of the business over a period of time.
Cash Flow Forecast: A report which estimates the cash flow in the future (usually required by a bank before it will lend
Cash In Hand: See Undeposited funds account .
Cash Inflows: Any current or expected revenues or savings directly associated with an investment.
Cash Outflows: The initial cost and other expected outlays associated with an investment.
Cash Over And Short: An account used to record overages and shortages in petty cash.
Cash Receipts Journal: A special journal in which all cash received, from sales, interest, rent, or other sources, is recor
Cash-Basis Accounting: A system of accounting in which transactions are recorded and revenues and expenses are recognized o
Cashiers Check: A check issued by a bank, drawn on its own funds and signed by the cashier.
Ceiling: The maximum market amount at which inventory can be carried on the books: equal to net realizable va
Certificate Of Deposit (CD): A timed deposit that may be protected by the FDIC, incurs penalty charges if money is withdrawn befo
Certified Public Accountant (CPA): A special designation given to an accountant who has passed a national uniform examination and has m
Charge Back: Refers to a credit card order which has been processed and is subsequently cancelled by the cardhold (See info)
Chart Of Accounts: A systematic listing of all accounts used by a company.
Chart Of Accounts: A list of all the accounts held in the nominal ledger.
Charter (Articles Of Incorporation): A document issued by a state that gives legal status to a corporation and details its specific right
Check Register (Ledger): A record of all activity that happens within a checking account: maintained by the checking account
Checking Account: An account from which the account holder can write checks.
Circulating Assets: The opposite to Fixed assets . Circulating assets describe those assets that turn from cash to goods
Classified Balance Sheet: A balance sheet in which assets and liabilities are subdivided into current and noncurrent categorie
Closed Transaction: A transaction that is completed within the accounting period: both the purchase and payment or sale
Closing Entries: Entries that reduce all nominal, or temporary, accounts to a zero balance at the end of each account
Closing The Books: A term used to describe the journal entries necessary to close the sales and expense accounts of a b
Code Of Professional Ethics: Rules set by the AICPA's Committee on Professional Ethics, which govern the conduct of CPAs.
Commission: A fee to a third party for assisting a business transaction, such as buying or selling an asset.
Common Stock: The most frequently issued class of stock: usually it provides a voting right but is secondary to pr
Companies House: The title given to the government department which collects and stores information supplied by limit
Comparative Financial Statements: Financial statements in which data for two or more years are shown together.
Compensating Error: A double-entry term applied to a mistake which has cancelled out another mistake.
Compensation: The total wage or salary and benefits that an employee receives. (See income.)
Compound Annual Growth Rate (CAGR): The year on year growth rate required to show the change in value (of an investment) from its initia
Compound Interest: Interest credited daily, monthly, quarterly, semi-annually, or annually on both principal and previo
Compound Interest: Apply interest on the capital plus all interest accrued to date. Eg. A loan with an annually applied
Compound Journal Entry: A journal entry that involves more than one debit or more than one credit or both.
Compounding Period: The period of time for which interest is computed.
Conduit Principle: The idea that all income earned by an entity must be passed through to the owners and reported on th
Consignee: A vendor who sells merchandise owned by another party, known as the consignor, usually on a commissi
Consignment: An arrangement whereby merchandise owned by one party (the consignor) is sold by another party (the
Consignor: The owner of merchandise to be sold by someone else, known as the consignee.
Consolidated Financial Statements: Statements that report the combined operating results, financial position, and cash flows of two or
Contingent Liability: A potential obligation, dependent upon the occurrence of future events.
Contra Account: An account created to offset another account. Eg: a Sales contra account would be Sales Discounts. T
Contributed Capital: The portion of owners' equity contributed by investors (the owners) in exchange for shares of stock.
Control Account: An account held in a ledger which summarises the balance of all the accounts in the same or another
Control Activities: Policies and procedures used by management to meet its objectives: generally divided into adequate s
Control Environment: The actions, policies, and procedures that reflect the overall attitudes of top management, the dire
Convertible Bonds: Bonds that can be traded for, or converted to, other securities after a specified period of time.
Convertible Preferred Stock: Preferred stock that can be converted to common stock at a specified conversion rate.
Cook The Books: Falsify a set of accounts. See also creative accounting .
Corporation: A legal entity chartered by a state: ownership is represented by transferable shares of stock.
Corporation Tax (CT): The tax paid by a limited company on its profits. At present this is calculated at year end and due
Cost Accounting: An area of management accounting which deals with the costs of a business in terms of enabling the m
Cost Centre: Splitting up your expenses by department. Eg. rather than having one account to handle all power cos
Cost Insurance Freight (CIF): A contract (international) for the sale of goods where the seller agrees to supply the goods, pay th
Cost Method Of Accounting For Investments In Stocks: Method used to account for an investment in the stock of another company when less than 20 percent o
Cost Of Finished Goods: The value (at cost) of newly manufactured goods shown in a business's manufacturing account. The val
Cost Of Goods Sold (COGS): A formula for working out the direct costs of your stock sold over a particular period. The result r
Cost Of Sales: A formula for working out the direct costs of your sales (including stock) over a particular period.
Cost Principle: The idea that transactions are recorded at their historical costs or exchange prices at the transact
Cost-Based Pricing: Where a company bases its pricing policy solely on the costs of manufacturing rather than current ma
Cost-Benefit: Calculating not only the financial costs of a project, but also the cost of the effects it will have
Coupon Bonds: Unregistered bonds for which owners receive periodic interest payments by clipping a coupon from the
Creative Accounting: A questionable! means of making a companies figures appear more (or less) appealing to shareholders
Credit: A column in a journal or ledger to record the 'From' side of a transaction (eg. if you buy some petr
Credit Card Draft: The part of the multiple-page credit form that is sent by the retailer to the credit card company fo
Credit Counseling: Professional guidance from trained credit counselors, who will work with an individual to help them improve their credit score. (more info) o
Credit Laws: Fair Credit Reporting Act (as amended 1997) Federal law that covers the reporting of debt repayment
Credit Note: A sales invoice in reverse. A typical example is where you issue an invoice for £100, the customer
Credit Report: Financial information collected by businesses and used by lenders to determine creditworthiness of i
Credit Unions: Not-for-profit cooperatives of members with some type of common bond (e.g., employer) that provide a
Creditor: A person to whom a debt is owed.
Creditors: A list of suppliers to whom the business owes money.
Creditors (Control Account): An account in the nominal ledger which contains the overall balance of the Purchase Ledger.
Cumulative-Dividend Preference: The rights of preferred stockholders to receive current dividends plus all dividends in arrears befo
Current (Or Working Capital) Ratio: A measure of the liquidity of a business: equal to current assets divided by current liabilities.
Current Assets: These include money in the bank, petty cash, money received but not yet banked (see 'cash in hand'),
Current Cost Accounting: The valuing of assets, stock, raw materials etc. at current market value as opposed to its historica
Current Liabilities: These include bank overdrafts, short term loans (less than a year), and what the business owes its s
Current-Dividend Preference: The right of preferred shareholders to receive current dividends before common shareholders receive
Customs And Excise: The government department usually responsible for collecting sales tax (eg. VAT in the UK).
Date Of Record: The date selected by a corporation's board of directors on which the shareholders of record are iden
Days Sales Outstanding (DSO): How long on average it takes a company to collect the money owed to it.
Debenture: This is a type of share issued by a limited company. It is the safest type of share in that it is re
Debentures (Unsecured Bonds): Bonds for which no collateral has been pledged.
Debit: A column in a journal or ledger to record the 'To' side of a transaction (eg. if you are paying mone
Debit Card: Bank cards that allow the payment of goods and services to be subtracted directly from a bank accoun
Debt Financing: Acquiring funds by borrowing money from creditors in the form of long-term notes, mortgages, leases,
Debt Securities: Financial instruments issued by a company that carry with them a promise of interest payments and th
Debt-Equity Management Ratio: A measurement of the relative utilization of debt and equity: computed by dividing average total ass
Debtors: A list of customers who owe money to the business.
Debtors (Control Account): An account in the nominal ledger which contains the overall balance of the Sales Ledger.
Declaration Date: The date on which a corporation's board of directors formally decides to pay a dividend to sharehold
Declining-Balance Depreciation Method: An accelerated depreciation method in which an asset's book value is multiplied by a constant deprec
Deduction: Business expenses or losses that are subtracted from gross income in computing taxable income.
Deferred Expenditure: Expenses incurred which do not apply to the current accounting period. Instead, they are debited to
Deferred Income Taxes: An account used to record the difference between income tax expense on the income statement and inco
Deflation: A broad, overall drop in the price of goods and services: the opposite of the more common inflation.
Depletion: The process of cost allocation that assigns the original cost of a natural resource to the periods b
Depreciation: The value of assets usually decreases as time goes by. The amount or percentage it decreases by is c
Dilutive: If a company acquires another and says the deal is 'dilutive to earnings', it means that the resulti
Direct Deposit: Prearranged payments from a third party directly into a bank account (e.g.,paychecks, Social Securit
Direct Method: A method of reporting net cash flow from operations that shows the major classes of cash receipts an
Direct Write-Off Method: The recording of actual losses from uncollectible accounts as expenses during the period in which ac
Disclaimer Of Opinion: A disclaimer indicating the auditor was unable to satisfy himself or herself that the overall financ
Discount: The amount charged by a financial institution when a note receivable is discounted: calculated as ma
Discount Period: The time between the date a note is sold to a financial institution and its maturity date.
Discount Rate: The interest rate charged by a financial institution for buying a note receivable.
Discounting A Note Receivable: The process of the payee's selling notes to financial institution for less than the maturity value.
Disposable Income: Income remaining after income and payroll taxes are deducted from gross pay: income available to spe
Diversification: The process of spreading assets among different investments to reduce the risk of a decline in value
Diversified Companies: Companies operating in more than one line of business.
Dividend: A payment to shareholders that a company’s board of directors approves from earnings.
Dividend Payment Date: The date on which a corporation pays dividends to its shareholders.
Dividend Payout Ratio: A measure of the percentage of earnings paid out in dividends: computed by dividing cash dividends b
Dividends: These are payments to the shareholders of a limited company.
Dividends Account: The account used to reflect periodic distributions of earnings to the owners (stockholders) of a cor
Dividends In Arrears: Missed dividends for past years that preferred stockholders have a right to receive under the cumula
Dollar Cost Averaging: Investing regular sums of money (e.g., $50) at regular time intervals (e.g., quarterly) regardless o
Double-Entry Accounting: A system of recording transactions in a way that maintains the equality of the accounting equation.
Double-Entry Book-Keeping: A system which accounts for every aspect of a transaction - where it came from and where it went to.
Drawings: Distribution to the owner(s) of a proprietorship or partnership: similar to dividends for a corporat
Drawings: The money taken out of a business by its owner(s) for personal use. This is entirely different to wa
Drawings Account: The account used to reflect periodic withdrawals of earnings by the owner (proprietor) or owners (pa
Earned Income: Payment received for work, such as wages, salaries, commissions, and tips.
Earnings Before Interest Tax Depreciation And Amortization (EBITDA): Is used to isolate operating numbers from long-term costs -- for example, goodwill resulting from a
Earnings Per Share (EPS): The amount of net income (earnings) related to each share of stock: computed by dividing net income
Effective (Yield Or Market) Rate Of Interest: The actual interest rate earned or paid on a bond investment.
Effective Tax Rate: A tax rate that reflects the percentage of the actual tax liability to the accounting income generat
Effective-Interest Amortization: A method of systematically writing off a bond premium or discount that takes into consideration the
Electronic Data Processing (EDP): A term referring to the use of computers in recording, classifying, manipulating, and summarizing da
Employee Benefit: Something of value that an employee receives in addition to a wage or salary. Examples include healt
Employee Stock Option Appreciation Rights Securities (ESOARS): An auction process to assign a value to the options. The high bidder owns the option and receives a
Employer-Sponsored Retirement Savings Program: Tax-deferred savings plans offered by employers that provide a federal tax deduction, tax-deferral o
Employer-Sponsored Savings Plan: A government-approved program through which an employer can assist workers in building their persona
Encumbrance: A liability (eg. a mortgage is an encumbrance on a property). Also, any money set aside (ie. reserve
Endorsement: Signature on the back of the check, entitling the payee to either receive or transfer payment.
Entity: An organizational unit (a person, partnership, or corporation) for which accounting records are kept
Entrepreneur: A person who starts a business.
Entry: Part of a transaction recorded in a journal or posted to a ledger.
Equal Credit Opportunity Act (1974): Federal law that ensures that consumers are given an equal chance to receive credit. Prohibits discr
Equity: The value of the business to the owner of the business (which is the difference between the business
Equity Financing: Acquiring funds in the form of investments by owners (proprietor, partner, or stockholder).
Equity Method Or Accounting For Investments In Stocks: Method used to account for an investments in the stock of another company when significant influence
Equity Securities: Shares of ownership in a corporation that can change significantly in value and that provide for a r
Error Of Commission: A double-entry term which means that one or both sides of a double-entry has been posted to the wron
Error Of Ommission: A double-entry term which means that a transaction has been ommitted from the books entirely.
Error Of Original Entry: A double-entry term which means that a transaction has been entered with the wrong amount.
Error Of Principle: A double-entry term which means that one or both sides of a double-entry has been posted to the wron
Exchange Gain Or Loss: The gain or loss incurred when the exchange rates are different on the purchase and payment dates or
Exchange Rate: The value of one currency in terms of another.
Exclusions: Gross receipts that are not subject to tax and are not included in gross income, such as interest on
Expenses: Goods or services purchased directly for the running of the business. This does not include goods bo
External Auditors: Independent CPAs who are retained by organizations to perform audits of financial statements.
External Audits: Audits conducted by CPAs who are independent of the client company.
Extraordinary Items: Nonoperating gains and losses that are unusual in nature, infrequent in occurrence, and material in
Factor: To sell accounts receivable at a discount before they are due.
Fair Credit And Charge Card Disclosure Act (1989): A part of the Truth in Lending Act that mandates a box on credit card applications that describes ke
Fair Credit Billing Act (1975): Federal law that covers credit card billing problems. It applies to all open-end credit accounts (e.
Fair Debt Collection Practices Act (1978): Federal law that prohibits debt collectors from engaging in unfair, deceptive, or abusive practices
Fair Market Value: The current value of an asset, e.g., the amount at which an asset could be sold or purchased in an a
FIFO (First-In First-Out): An inventory cost flow whereby the first goods purchased are assumed to be the first goods sold so t
Financial Accounting: The area of accounting concerned with reporting financial information to interested external parties
Financial Accounting Standards Board (FASB): The private organization responsible for establishing the standards for financial accounting and rep
Financial Statements: Reports such as the balance sheet, income statement, and statement of cash flows, which summarize th
Financing Activities: Transactions and events whereby resources are obtained from, or repaid to, owners (equity financing)
Fiscal Year: An entity's reporting year, covering a 12 month accounting period.
Fiscal Year: The term used for a business's accounting year. The period is usually twelve months which can begin
Fixed Assets: These consist of anything which a business owns or buys for use within the business and which still
Fixtures and Fittings: This is a class of fixed asset which includes office furniture, filing cabinets, display cases, ware
Flash Earnings: A news release issued by a company that shows its latest quarterly results.
Floor: The minimum market amount at which inventory can be carried on the books: equal to net realizable va
Flow Of Funds: This is a report which shows how a balance sheet has changed from one period to the next.
FOB: An abbreviation of Free On Board. It generally forms part of an export contract where the seller pay
FOB (Free-On-Board) Destination: A business term meaning that the seller of merchandise bears the shipping costs and maintains owners
FOB (Free-On-Board) Shipping Point: A business term meaning that the buyer of merchandise bears the shipping costs and acquires ownershi
Foreign Corrupt Practices Act (FCPA): Legislation requiring any company that has publicly-traded stock to maintain records that accurately
Franchise: An entity that has been licensed to sell the product of a manufacturer or to offer a particular serv
Freight Collect: The buyer pays the shipping costs.
Freight-In: An account used with the periodic inventory method for recording the costs of transporting into a fi
Functional Currency: The currency in which a subsidiary conducts most of its business: generally, but not always, the cur
Garnishment: A court order requesting that an employer deduct a percentage of the employee’s paycheck and send
Gearing (Leverage): The comparison of a company's long term fixed interest loans compared to its assets. In general two
General Ledger: See Nominal Ledger .
General-Purpose Financial Statements: The financial reports intended for use by a variety of external groups: they include the balance she
Generally Accepted Accounting Principles (GAAP): Authoritative guidelines that define accounting practice at a particular time.
Generally Accepted Auditing Standards (GAAS): Auditing standards developed by the AICPA.
Going Concern: The idea that an accounting entity will have a continuing existence for the foreseeable future.
Goodwill: An intangible asset that exists when a business is valued at more than the fair market value of its
Government Transfer Payment: Payments by governments, such as social security, veterans’ benefits, and welfare, to people who d
Grace Period: A time period during which a borrower can pay the full balance of credit due and not incur any finan
Gross Income: The taxable portion of a taxpayer's gross receipts.
Gross Loss: The balance of the trading account assuming it has a debit balance.
Gross Margin: The difference between the selling price of a product or service and the cost of that product or ser
Gross Margin Method: A procedure for estimating the amount of ending inventory: the historical relationship of cost of go
Gross Profit: The balance of the trading account assuming it has a credit balance.
Gross Sales: Total recorded sales before deducting any sales discounts or sales returns and allowances.
Gross Tax Liability: The amount of tax computed by multiplying the tax base (taxable income) by the appropriate tax rates
Growth And Acquisition (G and A): Describes a way a company can grow. Growth means expanding through its normal operations, Acquisitio
Held-To-Maturity Securities: Debt securities purchased by an investor with the intent of holding the securities until they mature
Historical Cost: The dollar amount originally exchanged in an arm's-length transaction: an amount assumed to reflect
Historical Cost: Assets, stock, raw materials etc. can be valued at what they originally cost (which is what the term
Historical Exchange Rate: The exchange rate that existed on the date of a transaction.
Horizontal Analysis Of Financial Statements: A technique for analyzing the percentage change in individual income statement or balance sheet item
Identity Theft: Crime committed when someone gains access to and uses another person's credit card numbers, social s
Impersonal Accounts: These are accounts not held in the name of persons (ie. they do not relate directly to a business's
Imprest Petty Cash Fund: A petty cash fund in which all expenditures are documented by vouchers or vendors' receipts or invoi
Imprest System: A method of topping up petty cash. A fixed sum of petty cash is placed in the petty cash box. When t
Income: Money received by a business from its commercial activities. See Revenue, Compensation.
Income Statement (Statement Of Earnings): The financial statement that summarizes the revenues generated and the expenses incurred by an entit
Income Taxes Payable: The amount expected to be paid to the federal and state governments based on the income before taxes
Independent Checks: Procedures for continual internal verification of other controls. indirect method: A method of repor
Inflation: An increase in the general price level of goods and services: alternatively, a decrease in the purch
Inland Revenue: The government department usually responsible for collecting your tax.
Insolvent: A company is insolvent if it has insufficient funds (all of its assets) to pay its debts (all of its
Insurance: Protection against the loss of life, health, home, car, or other valuables.
Intangible Assets: Assets of a non-physical or financial nature. An asset such as a loan or an endowment policy are goo
Integration Account: See Control Account .
Intercompany Transaction: A transaction between a parent company and a subsidiary company.
Interest: The payment (cost) for the use of money. Money paid to savers and investors by financial institution
Interest Rate: The cost of using money, expressed as an annual percentage.
Internal Auditors: An independent group of experts in controls, accounting, and operations, who monitor operating resul
Internal Control Structure: Safeguards in the form of policies and procedures established to provide management with reasonable
Inventory: A subsidiary ledger which is usually used to record the details of individual items of stock. Invent
Inventory Cutoff: The determination of which items should be included in the year-end inventory balance.
Inventory Turnover Ratio: A measure of the efficiency with which inventory is managed: computed by dividing cost of goods sold
Investing: The process of setting money aside to increase wealth over time and accumulate funds for long-term f
Investing Activities: Transactions and events that involve the purchase and sale of securities (excluding cash equivalents
Investors: People investing in securities, such as stock and bonds, to achieve long-term financial goals.
Invoice: A term describing an original document either issued by a business for the sale of goods on credit (
Issued Stock: Authorized stock originally issued to stockholders: it may or may not still be outstanding.
Itemized Deduction: Amounts paid by an individual taxpayer for personal and quasi-business expenses that can be deducted
JIT (Just-In-Time) Inventory: An inventory system that allows for the elimination of inventory stockpiles and inefficiency and was
Journal: An accounting record in which transactions are first entered: provides a chronological record of all
Journal Entries: A term used to describe the transactions recorded in a journal.
Journal Entry: A recording of a transaction where debits equal credits: usually includes a date and an explanation
Journal Proper: A term used to describe the main or general journal where other journals specific to subsidiary ledg
Journal(S): A book or set of books where your transactions are first entered.
Junk Bonds: Bonds issued by companies in weak financial condition with large amounts of debt already outstanding
K - No Entries:
Landed Costs: The total costs involved when importing goods. They include buying, shipping, insuring and associate
Lapping: A procedure used to conceal the theft of cash by crediting the payment from one customer to another
Lease: A contract that specifies the terms under which the owner of an asset (the lessor) agrees to transfe
Ledger: A book of accounts in which data from transactions recorded in journals are posted and thereby class
Legal Capital: The amount of contributed capital not available for dividends: usually equal to the par or stated va
Lessee: The party that is granted the right to use property under the terms of a lease.
Lessor: The owner of property that is rented (leased) to another party.
Leverage: See Gearing .
Liabilities: Obligations measurable in monetary terms that represent amounts owed to creditors, governments, empl
Liabilities: This includes bank overdrafts, loans taken out for the business and money owed by the business to it
License: The right to perform certain activities, generally granted by a governmental agency.
Lien: A court order where a creditor places a claim on property or other types of security owned by the de
LIFO (Last-In First-Out): An inventory cost flow whereby the last goods purchased are assumed to be the first goods sold so th
Limited Liability: The legal protection given stockholders whereby they are responsible for the debts and obligations o
Liquidation: The process of dissolving a business by selling the assets, paying the debts, and distributing the r
Liquidity: A company's ability to meet current obligations with cash or other assets that can be quickly conver
Long Term Liabilities: These usually refer to long term loans (ie. a loan which lasts for more than one year such as a mort
Long-Term Investment: An expenditure to acquire a non-operating asset that is expected to increase in value or generate in
Long-Term Liabilities: Debts or toher obligations that will not be paid within one year.
Loss: See Net loss .
Loss Per Share: The amount of net loss related to each share of stock: computed by dividing net loss by a number of
Losses: Costs that provide no benefit to an organization.
Lower Cost Or Market (LCM): A basis for valuing certain assets at the lower of original cost or current market value.
LTIP: Long-term incentive payments. These can come in a variety of combinations and formats including but
Maker: A person (entity) who signs a note to borrow money and who assumes responsibility to pay the note at
Management Accounting: The area of accounting concerned with providing internal financial reports to assist management in m
Management Accounting: Accounts and reports are tailor made for the use of the managers and directors of a business (in any
Manufacturing Account: An account used to show what it cost to produce the finished goods made by a manufacturing business.
Market Adjustment-Trading Securities Account: An account used to track the difference between the historical cost and the market value of a compan
Matching Principle: The concept that all costs and expenses incurred in generating revenues must be recognized in the sa
Matching Principle: A method of analysing the sales and expenses which make up those sales to a particular period (eg. i
Maturity Date: The date on which a note or other obligation becomes due.
Maturity Value: The amount of an obligation to be collected or paid at maturity: equal to principal plus any interes
MD and A: Management Discussion and Analysis. Usually seen in a financial report. The information disclosed ha
Medicare: A federal government program of transfer payments for certain health care expenses for citizens 65 o
Memo Billing (Memo Invoicing): Goods ordered and invoiced on approval. There is no obligation to buy.
Memorandum Accounts: A name for the accounts held in a subsidiary ledger. Eg. the accounts in a sales ledger .
Merger: The acquisition of one company by another company whereby the companies combine as one legal entity,
Minority Interest: A minority interest represents a minority of shares not held by the holding company of a subsidiary.
Modified Accelerated Cost Recovery System (MACRS): IRS regulations that allocate the cost of an asset according to predefined recovery periods and perc
Monetary Measurement: The idea that money, as the common medium of exchange, is the accounting unit of measurement, and th
Money Market Account: A type of savings account that may or may not be protected by the FDIC, with minimum balance require
Money Wire (Transfer): The process of moving money from one bank to another, sometimes between countries.
Mortgage Amortization Schedule: A schedule that shows the breakdown between interest and principal for each payment over the life of
Mortgage Payable: A written promise to pay a stated amount of money at one or more specified future dates: a mortgage
Moving Average: A way of smoothing out (i.e. removing the highs and lows) of a series of figures (usually shown as a
Multiple-Step Income Statement (Multi-Step): An income statement (Profit and Loss ) which has had its revenue section split up into sub-sections
Mutual Agency: The right of all partners in a partnership to act as agents for the normal business operations of th
Mutual Funds: Investment companies that pool money from shareholders and invest in a variety of securities, includ
Narrative: A comment appended to an entry in a journal. It can be used to describe the nature of the transactio
National Credit Union Administration (NCUA): A federal agency that charters and oversees federal credit unions. The NCUA insures deposits at fede
Natural Resources: Assets that are physically consumed or waste away, such as oil, minerals, gravel, and timber.
Net Assets (Owners Equity): The ownership interest in the assets of an entity: equal total assets minus total liabilities.
Net Income (Or Net Loss): A measure of the overall performance of a business entity: equal to revenues minus expenses for the
Net Loss: The value of expenses less sales assuming that the expenses are greater (ie. if the profit and loss
Net Of Tax: The price less any tax. Eg. if you sold some goods for $12 inclusive of $2 sales tax, then the 'net
Net Proceeds: The difference between maturity value and discount when a note receivable is discounted.
Net Profit: The value of sales less expenses assuming that the sales are greater (ie. if the profit and loss acc
Net Realizable Value: The selling price of an item less reasonable selling costs.
Net Realizable Value Of Accounts Receivable: The net amount that would be received if all receivables considered collectible were collected: equa
Net Sales: Gross sales less sales discounts and sales returns and allowances.
Net Tax Liability: The amount of tax computed by subtracting tax credits from the gross tax liability.
Net Worth: See Equity .
No-Par Stock: Stock that does not have a par value printed on the face of the stock certificate.
Nominal Accounts: Accounts that are closed to a zero balance at the end of each accounting period: temporary accounts
Nominal Accounts: A set of accounts held in the nominal ledger. They are termed 'nominal' because they don't usually r
Nominal Ledger: A ledger which holds all the nominal accounts of a business. Where the business uses a subsidiary le
Noncash Items: Items included in the determination of net income on an accrual basis that do not affect cash: examp
Noncash Transactions: Investing and financing activities that do not affect cash: if significant, they are disclosed below
Nonoperating Assets: Investment and other assets not used in a business but held to earn a return separate from operation
Nonprofit Organization: An entity without a profit objective, oriented toward providing services efficiently and effectively
Normalize: This term can be applied to many aspects of accounting. It means to average or smooth out a set of f
Note Payable: A debt owed to a creditor, evidenced by an unconditional written promise to pay a certain sum of mon
Note Receivable: A claim against a debtor, evidenced by an unconditional written promise to pay a certain sum of mone
Notes To Financial Statements: Explanatory information considered an integral part of the financial statements.
Number Of Days Of Inventory On Hand: An alternative measure of how well inventory is being managed: computed by dividing 365 days by the
Number Of Days Sales In Receivables: A measure of the average number of days it takes to collect a credit sale: computed by dividing 365
Number Of Days Sales Invested In Working Capital: An alternative measure of the amount of working capital used in generating the sales of a period: co
Open Transaction: A transaction that is not completed at the end of the accounting period: a purchase that has not yet
Opening The Books: Every time a business closes the books for a year, it opens a new set. The new set of books will be
Operating Activities: Transactions and events that enter into the determination of net income.
Operating Assets: Long-term, or noncurrent, assets acquired for use in the business rather than for resale: includes p
Operating Lease: A simple rental agreement.
Operating Leverage: The extent to which fixed costs are part of a company's cost structure: the higher the proportion of
Operating Performance Ratio: An overall measure of the efficiency of operations during a period: computed by dividing net income
Opportunity Cost: The opportunity cost of a choice is the value of the best alternative given up.
Optimal Asset Utilization (OAU): A supply-chain metric to gauge the right speed for asset turnover. Operational Asset Utilization (OA
Ordinary Share: This is a type of share issued by a limited company. It carries the highest risk but usually attract
Organizational Structure: Lines of authority and responsibility.
Original Book Of Entry: A book which contains the details of the day to day transactions of a business (see Journal ).
Other Revenues And Expenses: Items incurred or earned from activities that are outside, or peripheral to, the normal operations o
Outstanding Stock: Issued stock that is still being held by investors.
Overdraft: Lack of sufficient funds to cover the full amount of a check.
Overdraft Protection: Procedure agreed upon by an account holder and a bank in advance to transfer funds from a savings or
Overheads: These are the costs involved in running a business. They consist entirely of expense accounts (eg. r
Owners Equity (Net Assets): The ownership interest in the assets of an entity: equal total assets minus total liabilities.
P and L: See Profit and Loss Account
P.A.Y.E: 'Pay as you earn'. The name given to the income tax system where an employee's tax and national insu
Paid-Up Share Capital: The value of issued shares which have been paid for. See Called-up Share capital.
Par-Value Stock: Stock that has a nominal value assigned to it in the corporation's charter and printed on the face o
Parent Company: A company that owns or maintains control over other companies, known as subsidiaries, which are them
Pareto Optimum: An economic theory by Vilfredo Pareto. It states that the optimum allocation of a society's resource
Partnership: An association of two or more individuals or organizations to carry on economic activity.
Partnership Agreement: A legal agreement between partners: it usually specifies, among other things, the capital contributi
Patent: An exclusive right granted for 17 years by the federal government to manufacture and sell an inventi
Pay On Delivery: The buyer pays the cost of the goods (to the carrier) on receipt of them.
Payee: The person (entity) to whom payment on a note is to be made.
Payroll Deduction: An amount subtracted from a paycheck as the government requires or the employee requests. Mandatory
PE (Price Earning) Ratio: An equation which gives you a very rough estimate as to how much confidence there is in a company's
Pension Plan: A contract between a company and it employees whereby the company agrees to pay benefits to employee
Periodic Inventory: A Periodic Inventory is one whose balance is updated on a periodic basis, ie. every week/month/year.
Periodic Inventory Method: A system of accounting for inventory in which cost of goods sold is determined and inventory is adju
Perpetual Inventory: A Perpetual Inventory is one whose balance is updated after each and every transaction. See Inventor
Perpetual Inventory Method: A system of accounting for inventory in which detailed records of the number of units and the cost o
Personal Accounts: These are the accounts of a business's customers and suppliers. They are usually held in the Sales a
Petty Cash: A small amount of money held in reserve (normally used to purchase items of small value where a cheq
Petty Cash Fund: A small amount of cash kept on hand for making miscellaneous payments.
Petty Cash Slip: A document used to record petty cash payments where an original receipt was not obtained (sometimes
Physical Safeguards: Physical precautions used to protect assets and records, such as locks on doors, fireproof vaults, p
Point Of Sale (POS): The place where a sale of goods takes place, eg. a shop counter.
Post-Closing Trial Balance: A listing of all real account balances after the closing process has been completed: provides a mean
Posting: The process of transferring amounts from the journal to the ledger.
Pre-Payments: One or more accounts set up to account for money paid in advance (eg. insurance, where part of the p
Preemptive Right: The right of current stockholders to purchase additional shares of stock in order to maintain their
Preference Shares: This is a type of share issued by a limited company. It carries a medium risk but has the advantage
Preferred Stock: A class of stock that usually provides dividend and liquidation preferences over common stock.
Premium On Stock: The excess of the issuance (market) price of stock over its par or stated value.
Prepaid Expenses: Payments made in advance for items normally charged to expense.
Present Value Of $1: The value today of $1 to be received or paid at some future date given a specified interest rate.
Present Value Of An Annuity: The value today of a series of equally spaced, equal-amount payments to be made or received in the f
Price Change Accounting: Accounting for the value of assets, stock, raw materials etc. by their current market value instead
Primary Financial Statements: The balance sheet, income statement, and statement of cash flows, used by external groups to assess
Prime Book Of Entry: See Original book of entry .
Principal (Face Value Or Maturity Value): The amount that will be paid on a bond at a maturity date. The original amount of money invested, ex
Principal On A Note: The face amount of a note: the amount (excluding interest) that the maker agrees to pay the payee.
Prior-Period Adjustments: Adjustments made directly to Retained Earnings in order to correct errors in the financial statement
Pro Rata: A term describing an allocation that is based on a proportionate distribution of the total.
Pro-Forma Accounts (Pro-Forma Financial Statements): A set of accounts prepared before the accounts have been officially audited. Often done for internal
Pro-Forma Invoice: An invoice sent that requires payment before any goods or services have been despatched.
Profit: The positive difference between total revenue from a business or investment, minus total expense. Se
Profit And Loss Account: An account made up of revenue and expense accounts which shows the current profit or loss of a busin
Profit Margin: The percentage difference between the costs of a product and the price you sell it for. Eg. if a pro
Profitability: A company's ability to generate revenues in excess of the costs incurred in producing those revenues
Proper Authorization: Policy regarding either a general class of transactions such as inventory or a specific transaction
Property Dividend: The distribution to shareholders of assets other than cash.
Property Plant And Equipment: Tangible, long-lived assets acquired for use in business operations: includes land, buildings, machi
Property Plant And Equipment Turnover: A measure of how well property, plant, and equipment are being utilized in generating a period's sal
Proprietorship: A business owned by one person.
Prospectus: An official document that contains information required by the Securities & Exchange Commission to d
Provisions: One or more accounts set up to account for expected future payments (eg. where a business is expecti
Public Companies: Entities whose stock is publicly traded.
Purchase Discount: A reduction in the purchase price, allowed if payment is made within a specified period.
Purchase Invoice: See Invoice .
Purchase Ledger: A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is
Purchase Method: A method used to prepare consolidated financial statements when one company has acquired a controlli
Purchase Returns And Allowances: A contra-purchase account used for recording the return of, or allowances for, previously purchased
Purchases Account: An account in which all inventory purchases are recorded: used with the periodic inventory method.
Purchases Journal: A special journal in which credit purchases are recorded.
Purchasing Power: A measurement of the relative value of money in terms of the quality and quantity of goods and servi
Rate Of Return: Also called the “yield,” this is the return on an investment expressed as a percentage of its co
Raw Materials: This refers to the materials bought by a manufacturing business in order to manufacture its products
Real Accounts: Accounts that are not closed to a zero balance at the end of each accounting period: permanent accou
Real Accounts: These are accounts which deal with money such as bank and cash accounts. They also include those dea
Realisation Principle: The principle whereby the value of an asset can only be determined when it is sold or otherwise disp
Realized Gains And Losses: Gains and losses resulting from the sale of securities in an arm's length transaction.
Rebate: If you pay for a service, then cancel it, you may receive a 'rebate'. That is, you may be refunded s
Receipt: A term typically used to describe confirmation of a payment - if you buy some petrol you will normal
Receivables: Claims for money, goods, or services.
Reconciling: The procedure of checking entries made in a business's books with those on a statement sent by a thi
Recourse: The right to seek payment on a discounted note from the payee if the maker defaults.
Recovery Period: The time period designated by Congress for depreciating business assets.
Redemption Value: The price, stated in the contract, to be paid by a company to repurchase preferred stock.
Refund: If you return some goods you have just bought (for whatever reason), the company you bought them fro
Registered Bonds: Bonds for which the names and addresses of the bondholders are kept on file by the issuing company.
Relative Fair Market Value Method: A way of allocating a lump-sum or 'basket' purchase price to the individual assets acquired based on
Rent: Periodic fee for the use of property.
Repossession: When the creditor takes back an item that has been purchased, because of nonpayment.
Reserve Accounts: Reserve accounts are usually set up to make a balance sheet clearer by reserving or apportioning som
Residual Income: The amount of net income an investment center is able to earn above a specified minimum rate of retu
Retail: A term usually applied to a shop which re-sells other people's goods. This type of business will req
Retail Inventory Method: A procedure for estimating the dollar amount of ending inventory: the ending inventory at retail pri
Retained Earnings: The portion of a corporation's owners' equity that has been earned from profitable operations and no
Retainer: A sum of money paid in order to ensure a person or company is available when required.
Retention Ratio: The proportion of the profits retained in a business after all the expenses (usually including tax a
Return On Infrastructure Employed (ROIE): A retrospective comparison of net earnings with yearly information technoloy (IT) operating expenses
Return On Investment (ROI): A measure of operating performance and efficiency in utilizing assets computed in its simplest form
Return On Sales Revenue: A measure of operating performance: computed by dividing net income by total sales revenue.
Return On Stockholders Equity: A measure of overall performance from a stockholder's viewpoint: includes management of operations,
Return On Total Assets: An overall measure of the return to both stockholders and creditors: includes operating performance
Revenue: The sales and any other taxable income of a business (eg. interest earned from money on deposit).
Revenue Recognition Principle: The idea that revenues should be recorded when (1) the earnings process has been substantially compl
Revenues: Increases in a company's resources from the sale of goods or services.
Risk: Exposure to loss of investment capital due to a variety of causes such as business failure, stock ma
Risk Management: Procedures to minimize the adverse effect of a possible financial loss by: 1) identifying potential
Roth IRA: An IRA that allows for tax-free withdrawals as long as the contributions remain in the account for f
Rule Of 72: A quick way to calculate how long it will take to double a sum of money. Divide 72 by the expected i
Run Rate: A forecast for the year based on the current year to date figures. If a company's 1st quarter profit
S Corporation: A domestic corporation that is recognized as a regular corporation under state law but is granted sp
Salary: Payment for work, usually calculated in periods of a week or longer. Salary is usually tied to the c
Sales: Income received from selling goods or a service. See Revenue .
Sales Discount: A reduction in the selling price that is allowed if payment is received within a specified period.
Sales Invoice: See Invoice .
Sales Journal: A special journal in which credit sales are recorded.
Sales Ledger: A subsidiary ledger which holds the accounts of a business's customers. A control account is held in
Sales Returns And Allowances: A contra-revenue account in which the return of, or allowance for, reduction in the price of merchan
Sales Tax Payable: Money collected from customers for sales taxes, that must be remitted to local governments and other
Salvage Or Residual Value: Estimated value or actual price of an asset at the conclusion of its useful life, net of disposal co
Savings: The process of setting aside money until a future date instead of spending it today. The goal of sav
Savings Accounts: Accounts at financial institutions that allow regular deposits and withdrawals. The minimum required
Savings and Loan Associations (S and Ls): Financial institutions that provide loans and interest-bearing accounts. Accounts in federally chart
Savings Bond: A bond is a certificate representing a debt. A U.S. Savings Bond is a loan to the government. The go
Section 125 Plan: A formal plan to provide tax savings by reducing employee medical premiums from gross salary prior t
Secured Bonds: Bonds for which assets have been pledged in order to guarantee repayment.
Securities And Exchange Commission (SEC): The government body responsible for regulating the financial reporting practices of most publicly ow
Segregation Of Duties: Strategy to provide an internal check on performance through separation of custody of assets from ac
Self Assessment: A new style of income tax return introduced for the 1996/1997 tax year. If you are self-employed, or
Self-Balancing Ledgers: A system which makes use of control accounts so that each ledger will balance on its own. A control
Self-Employed: The owner (or partner) of a business who is legally liable for all the debts of the business (ie. th
Selling General and Administrative Expense (SG and A): The expenses involved in running a business.
Service: A term usually applied to a business which sells a service rather than manufactures or sells goods (
Share Premium: The extra paid above the face value of a share. Example: if a company issues its shares at $10 each,
Shareholders: The owners of a limited company or corporation.
Shareholders (Stockholders): Individuals or organizations that own a portion (shares of stock) of a corporation.
Shares: These are documents issued by a company to its owners (the shareholders) which state how many shares
Shares Issued (Shares Outstanding): The number of shares a company has issued to shareholders.
Significant Influences: Influence presumed if a company owns between 20% and 50% of another company.
Simple Interest: Interest applied to the original sum invested (as opposed to compound interest ). Eg. 1000 invested
Single-Step Income Statement: An income statement where all the revenues are shown as a single total rather than being split up in
Sinking Fund: An account set up to reduce another account to zero over time (using the principles of amortization
SME: Small and Medium Enterprises (ie. small and medium size businesses). The distinction between what is
Social Security (FICA) Taxes: Federal Insurance Contributions Act taxes imposed on employee and employer: used mainly to provide r
Sole Trader: See Sole-proprietor .
Sole-Proprietor: The self-employed owner of a business (see Self-employed ).
Solvency: A company's long-run ability to meet all financial obligations.
Source Document: An original invoice, bill or receipt to which journal entries refer.
Special Journal: A book of original entry for recording similar transactions that occur frequently.
Special Order: An order that may be priced below the normal price in order to utilize excess capacity and thereby c
Specific Identification: A method of valuing inventory and determining cost of goods sold whereby the actual costs of specifi
Standard Unqualified Audit Report: Audit report indicating that all auditing conditions have been met, no significant misstatements hav
Stated Rate Of Interest: The rate of interest printed on the bond.
Stated Value: A nominal value assigned to no-par stock by the board of directors of a corporation.
Statement Of Cash Flows: The financial statement that shows an entity's cash inflows (receipts) and outflows (payments) durin
Statement Of Earnings (Income Statement): The financial statement that summarizes the revenues generated and the expenses incurred by an entit
Statement Of Partners Capital: A partnership report showing the changes in the capital balances: similar to a statement of retained
Statement Of Retained Earnings: A report that shows the changes in the Retained Earnings account during a period of time.
Statement Of Stockholders Equity: A financial statement that reports all changes in stockholders' equity.
Stock: This can refer to the shares of a limited company (see Shares ) or goods manufactured or bought for
Stock Certificate: A document issued by a corporation to stockholders evidencing ownership in the corporation.
Stock Control Account: An account held in the nominal ledger which holds the value of all the stock held in the inventory s
Stock Dividend: A pro rata distribution of additional shares of stock to shareholders.
Stock Split: The replacement of outstanding shares of stock with a greater number of new shares that have a propo
Stock Taking: Physically checking a business's stock for total quantities and value.
Stock Valuation: Valuing a stock of goods bought for manufacturing or re-sale.
Straight-Line Amortization: A method of systematically writing off a bond discount or premium in equal amounts each period until
Straight-Line Depreciation: Depreciating something by the same (ie. fixed) amount every year rather than as a percentage of its
Straight-Line Depreciation Method: The depreciation method in which the cost of an asset is allocated equally over the periods of an as
Subordinated Debt: If a company is liquidated (i.e. becomes insolvent ), the secured creditors are paid first. If any m
Subsidiary Company: A company owned or controlled by another company, known as the parent company.
Subsidiary Ledger: A grouping of individual accounts that in total equal the balance of a control account in the Genera
Subsidiary Ledgers: Ledgers opened in addition to a business's nominal ledger. They are used to keep sections of a busin
Sum-Of-The-Years-Digits (SYD) Depreciation Method: The accelerated depreciation method in which a constant balance (cost minus salvage value) is multip
Supplies: Materials used in a business that do not generally become part of the sales product and were not pur
Suspense Account: A temporary account used to force a trial balance to balance if there is only a small discrepancy (o
T Account: A particular method of displaying an account where the debits and associated information are shown o
Take Home Pay: Total wage or salary (plus bonuses) minus payroll deductions.
Tangible Assets: Assets of a physical nature. Examples include buildings, motor vehicles, plant and equipment, fixtur
Tangible Personal Business Property: Depreciable operating assets of a business, other than real property, including machinery, furniture
Tax: A government fee on business and individual income, activities, or products.
Tax Credit: An amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a
Tax Deduction: An expense that a taxpayer can subtract from taxable income. Examples include deductions for home mo
Tax Exemption: An amount that a taxpayer who meets certain criteria can subtract from taxable income. Examples incl
Tax-Exempt (Tax Free): Investments (e.g., municipal bonds) whose earnings are free from tax liability.
Taxable Income: Income subject to tax: total income adjusted for deductions, exemptions, and credits.
Term Bonds: Bonds that mature in one lump sum at a specified future date.
Three Column Cash Book: A journal which deals with the day to day cash and bank transactions of a business. The side of a tr
Time Period (Or Periodicity) Concept: The idea that the life of a business is divided into distinct and relatively short time periods so t
Time Value Of Money: Comparison of a lump sum of money, or a series of equal payments, between two different time periods
Times Interest Earned Ratio: Ratio that indicates the company's margin above the fixed interest charged to be paid to creditors:
Tip: An amount paid beyond what’s required, usually to express satisfaction with service quality: also
Total Cost Of Ownership (TCO): The real amount an asset will cost. Example: An accounting application retails at $1000. Support - w
Total Economic Impact (TEI): Total economic impact of a potential project in terms of other projects that may spring from it.
Trading Account: An account which shows the gross profit or loss of a manufacturing or retail business, i.e. sales le
Trading Securities: Debt and equity securities purchased with the intent of selling them should the need for cash arise
Transaction: Two or more entries made in a journal which when looked at together reflect an original document suc
Transactions: Exchange of goods or services between entities (whether individuals, businesses, or other organizati
Transfer: (See money wire.)
Transfer Payments: (See government transfer payments.)
Transportation Costs: Costs of transferring merchandise into or out of a firm.
Travelers Checks: Documents that function as cash but can be replaced if lost or stolen. Travelers’ checks are often
Treasury Stock: Issued stock that has subsequently been reacquired by the corporation.
Trial Balance: A listing of all account balances: provides a means of testing whether total debits equal total cred
Truth In Lending Act (1968): Federal law that mandates disclosure of information about the cost of credit. Both the finance charg
Turnover: The income of a business over a period of time (usually a year).
Uncollectible Accounts Expense: An account that represents the portion of the current period's receivables that are estimated to bec
Undeposited Funds Account: An account used to show the current total of money received (ie. not yet banked or spent). The 'fund
Unearned Income: Money received for which no exchange was made, such as a gift.
Unearned Revenues: Amounts received before they have been earned.
Units-Or-Production Depreciation Method: The depreciation method in which the cost of an asset is allocated to each period on the basis of th
Unlimited Liability: The lack of a ceiling on the amount of liability a proprietor or partner must assume: meaning that i
Unrealized Gains And Losses: Gains and losses resulting from changes in the value of securities that are still being held.
Unrecorded Expenses: Expenses incurred during a period that have not been recorded by the end of that period.
Unrecorded Revenues: Revenues earned during a period that have not been recorded by the end of that period.
Useful Life: The term used to describe the life over which an asset is expected to be useful to the company: cost
Value Added Tax (VAT): Value Added Tax, or VAT as it is usually called is a sales tax which increases the price of goods. A
Vendor-Specific Objective Evidence (VSOE): A method for determining the individual value of each item within a contract in order to recognize p
Vertical Analysis Of Financial Statements: A technique for analyzing the relationships between items on an income statement or balance sheet by
Wage: Payment for work, usually as calculated in periods of an hour rather than longer. (See Salary.)
Wages: Payments made to the employees of a business for their work on behalf of the business. These are cla
Wants: Desires for economic goods or services, not necessarily accompanied by the power to satisfy them.
Wealth: Accumulated assets such as money and/or possessions, often as a result of saving and investing.
Work In Progress: The value of partly finished (ie. partly manufactured) goods.
Write-Off: Depreciating an asset to zero in one go.
Zero Based Account (ZBA): Usually applied to a personal account (checking) where the balance is kept as close to zero as possi
Zero Based Budget (ZBB): Starting a budget at zero and justifying every cost that increases that budget.
Zero-Interest Bonds: Bonds issued with no promise of interest payments: only a lump sum payment will be made.