| Absorption costing | The accounting procedure whereby all manufacturing costs, including fixed costs, are included in the cost of goods manufactured
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| Accelerated method of depreciation | A method of depreciating asset
cost that allocates greater amounts of depreciation to an asset's early years
of useful life
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| Account balance | The difference between the amounts recorded on the two
sides of an account
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| Account form balance sheet | A balance sheet that lists assets on the
left and liabilities and owner's equity on the right (see also Report
form balance sheet)
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| Accounting | The process by which financial information about a business
is recorded, classified, summarized, interpreted, and communicated to owners,
managers, and other interested parties
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| Accounting cycle | A series of steps performed during each accounting
period to classify, record, and summarize data for a business and to produce
needed financial information
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| Accounting system | A process designed to accumulate, classify, and summarize
financial data
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| Accounts | Written records of the assets, liabilities, and owner's equity
of a business
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| Accounts payable | Amounts a business must pay in the future
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| Accounts payable ledger | A subsidiary ledger that contains a separate
account for each creditor
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| Accounts receivable | Claims for future collection from customers
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| Accounts receivable ledger | A subsidiary ledger that contains credit
customer accounts
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| Accounts receivable turnover | A measure of the speed with which sales
on account are collected; the ratio of net credit sales to average receivables
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| Accrual basis | A system of accounting by which all revenues and expenses
are matched and reported on financial statements for the applicable period,
regardless of when the cash related to the transaction is received or paid
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| Accrued expenses | Expense items that relate to the current period but
have not yet been paid and do not yet appear in the accounting records
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| Accrued income | Income that has been earned but not yet received and
recorded
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| Acid-test ratio | A measure of immediate liquidity; the ratio of quick
assets to current liabilities
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| Adjusting entries | Journal entries made to update accounts for items
that were not recorded during the accounting period
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| Adjustments | See Adjusting entries
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| Aging the accounts receivable | Classifying accounts receivable balances
according to how long they have been outstanding
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| Allowance method | A method of recording uncollectible accounts that
estimates losses from uncollectible accounts and charges them to expense in
the period when the sales are recorded
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| Amortization | The process of periodically transferring the acquisition
cost of an intangible asset to an expense account
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| Appropriation of retained earnings | A formal declaration of an intention
to restrict dividends
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| Articles of partnership | See Partnership agreement
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| Asset turnover | A measure of the effective use of assets in making
sales; the ratio of net sales to total assets
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| Assets | Property owned by a business
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| Audit trail | A chain of references that makes it possible to trace information,
locate errors, and prevent fraud
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| Auditing | The review of financial statements to assess their fairness
and adherence to generally accepted accounting principles
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| Auditor's report | An independent accountant's review of a firm's financial
statements
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| Authorized capital stock | The number of shares authorized for issue by
the corporate charter
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| Average collection period | The ratio of 365 days to the accounts receivable
turnover; also called the number of days' sales in receivables
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| Average cost method | A method of inventory costing using the average
cost of units of an item available for sale during the period to arrive at cost
of the ending inventory
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| Average method of process costing | A method of costing that combines
the cost of beginning inventory for each cost element with the costs during
the current period
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| Balance ledger form | A ledger account form that shows the balance of
the account after each entry is posted
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| Balance sheet | A formal report of a business's financial condition on
a certain date; reports the assets, liabilities, and owner's equity of the business
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| Bank draft | A check written by a bank that orders another bank to
pay the stated amount to a specific party
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| Bank reconciliation statement | A statement that accounts for all differences
between the balance on the bank statement and the book balance of cash
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| Banker's year | A 360-day period used to calculate interest on a
note
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| Bill of lading | A business document that lists goods accepted for
transportation
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| Blank endorsement | A signature of the payee written on the back of the
check that transfers ownership of the check without specifying to whom or for
what purpose
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| Bond indenture | A bond contract
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| Bond issue costs | Costs incurred in issuing bonds, such as legal and
accounting fees and printing costs
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| Bond retirement | When a bond is paid and the liability is removed
from the company's balance sheet
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| Bond sinking fund investment | A fund established to accumulate assets
to pay off bonds when they mature
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| Bonding | The process by which employees are investigated by an insurance
company that will insure the business against losses through employee theft
or mishandling of funds
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| Bonds payable | Long-term debt instruments that are written promises to
repay the principal at a future date; interest is due at a fixed rate payable
over the life of the bond
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| Book value (of assets) | That portion of an asset's original cost that
has not yet been depreciated
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| Book value (of stocks) | The total equity applicable to a class of stock
divided by the number of shares outstanding
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| Brand name | See Trade name
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| Break even | A point at which revenue equals expenses
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| Budget | An operating plan expressed in monetary units
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| Budget performance report | A comparison of actual costs and budgeted
costs
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| Business transaction | A financial event that changes the resources of
a firm
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| Bylaws | The guidelines for conducting a corporation's business affairs
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| Call price | The amount the corporation must pay for the bond when it
is called
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| Callable bonds | Bonds that allow the issuing corporation to require the
holder to surrender the bonds for payment before their maturity date
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| Callable preferred stock | Stock that gives the issuing corporation the
right to repurchase the preferred shares from the stockholders at a specific
price
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| Canceled check | A check paid by the bank on which it was drawn
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| Capacity | A facility's ability to produce or use
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| Capital | Financial investment in a business; equity
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| Capital stock ledger | A subsidiary ledger that contains a record of each
stockholder's purchases, transfers, and current balance of shares owned; also
called stockholders' ledger
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| Capital stock transfer journal | A record of stock transfers used for
posting to the stockholders' ledger
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| Capitalized costs | All costs recorded as part of an asset's costs
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| Carrying value of bonds | The balance of the Bonds Payable account plus
the Premium on Bonds Payable account minus the Discount on Bonds Payable account;
also called book value of bonds
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| Cash | In accounting, currency, coins, checks, money orders, and funds
on deposit in a bank
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| Cash discount | A discount offered by suppliers for payment received within
a specified period of time
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| Cash equivalents | Assets that are easily convertible into known
amounts of cash
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| Cash payments journal | A special journal used to record transactions
involving the payment of cash
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| Cash receipts journal | A special journal used to record and post transactions
involving the receipt of cash
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| Cash register proof | A verification that the amount of currency and coins
in a cash register agrees with the amount shown on the cash register audit tape
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| Cash Short or Over account | An account used to record any discrepancies
between the amount of currency and coins in the cash register and the amount
shown on the audit tape
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| Cashier's check | A draft on the issuing bank's own funds
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| Certified public accountant (CPA) | An independent accountant who provides
accounting services to the public for a fee
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| Charge-account sales | Sales made through the use of open-account credit
or one of various types of credit cards
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| Chart of accounts | A list of the accounts used by a business to record
its financial transactions
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| Check | A written order signed by an authorized person instructing a bank
to pay a specific sum of money to a designated person or business
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| Check register | The record of cash payments of vouchers
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| Chronological order | Organized in the order in which the events occur
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| Classification | A means of identifying each account as an asset, liability,
or owner's equity
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| Classified financial statement | A format by which revenues and expenses
on the income statement, and assets and liabilities on the balance sheet, are
divided into groups of similar accounts and a subtotal is given for each group
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| Closing entries | Journal entries that transfer the results of operations
(net income or net loss) to owner's equity and reduce the revenue, expense,
and drawing account balances to zero
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| Collateral trust bonds | Bonds secured by the pledge of securities, such
as stocks or bonds of other companies
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| Combined journal | A journal that combines features of the general journal
and the special journals in a single record
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| Commercial draft | A note issued by one party that orders another
party to pay a specified sum on a specified date
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| Commission basis | A method of paying employees according to a percentage
of net sales
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| Common costs | Costs not directly traceable to a specific segment
of a business
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| Common stock | The general class of stock issued when no other class of
stock is authorized; each share carries the same rights and privileges as every
other share. Even if preferred stock is issued, common stock will also be issued
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| Common Stock Dividend Distributable | account Equity account used
to record par, or stated, value of shares to be issued as the result of the
declaration of a stock dividend
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| Common-size statements | Financial statements with items expressed as
percentages of a base amount
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| Comparative statements | Financial statements presented side by side for
two or more years
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| Compensation record | See Individual earnings record
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| Compound entry | A journal entry with more than one debit or credit
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| Conservatism | The concept that revenue and assets should be understated
rather than overstated if GAAP allows alternatives. Similarly, expenses and
liabilities should be overstated rather than understated
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| Consistency principle | The concept that requires a business to apply
an accounting principle the same way from one period to the next
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| Contingent liability | An item that can become a liability if certain
things happen
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| Contra account | An account with a normal balance that is opposite that
of a related account
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| Contra asset account | An asset account with a credit balance, which is
contrary to the normal balance of an asset account
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| Contra revenue account | An account with a debit balance, which is contrary
to the normal balance for a revenue account
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| Contribution margin | Revenues minus variable costs
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| Control account | An account that links a subsidiary ledger and the general
ledger since its balance summarizes the balances of the accounts in the subsidiary
ledger
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| Controllable fixed costs | Costs that the segment manager can control
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| Convertible bonds | Bonds that give the owner the right to convert
the bonds into common stock under specified conditions
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| Convertible preferred stock | Preferred stock that conveys the right to
convert that stock to common stock after a specified date or during a period
of time
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| Copyright | An intangible asset; an exclusive right granted by the
federal government to produce, publish, and sell a literary or artistic work
for a period equal to the creator's life plus 70 years
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| Corporate charter | A document issued by a state government that establishes
a corporation
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| Corporation | A publicly or privately owned business entity that is separate
from its owners and has a legal right to own property and do business in its
own name; stockholders are not responsible for the debts or taxes of the business
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| Correcting entry | A journal entry made to correct an erroneous entry
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| Cost basis principle | The principle that requires assets to be recorded
at their cost at the time they are acquired
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| Cost center | A business segment that incurs costs but does not produce
revenue
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| Cost of goods sold | The actual cost to the business of the merchandise
sold to customers
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| Cost of production report | Summarizes all costs charged to each department
and shows the costs assigned to the goods transferred out of the department
and to the goods still in process
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| Cost variance | The difference between the total standard cost and the
total actual cost
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| Coupon bonds | Unregistered bonds that have coupons attached for each
interest payment; also called bearer bonds
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| Credit | An entry on the right side of an account
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| Credit memorandum (accounts receivable) | A note verifying that a customer's
account is being reduced by the amount of a sales return or sales allowance
plus any sales tax that may have been involved
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| Credit memorandum (banking) | A form that explains any addition, other
than a deposit, to a checking account
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| Creditor | One to whom money is owed
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| Cumulative preferred stock | Stock that conveys to its owners the right
to receive the preference dividend for the current year and any prior years
in which the preference dividend was not paid before common stockholders receive
any dividends
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| Current assets | Assets consisting of cash, items that normally will be
converted into cash within one year, or items that will be used up within one
year
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| Current liabilities | Debts that must be paid within one year
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| Current ratio | A relationship between current assets and current liabilities
that provides a measure of a firm's ability to pay its current debts (current
ratio = current assets ÷ current liabilities)
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| Debentures | Unsecured bonds backed only by a corporation's general credit
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| Debit | An entry on the left side of an account
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| Debit memorandum | A form that explains any deduction, other than a check,
from a checking account
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| Declaration date | The date on which the board of directors declares a
dividend
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| Declining-balance method | An accelerated method of depreciation in which
an asset's book value at the beginning of a year is multiplied by a percentage
to determine depreciation for the year
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| Deferred expenses | See Prepaid expenses
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| Deferred income | See Unearned income
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| Deferred income taxes | The amount of taxes that will be payable in the
future as a result of the difference between taxable income and income for financial
statement purposes in the current year and in past years
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| Departmental income statement | Income statement that shows each
department's contribution margin and net income from operations after all expenses
are allocated
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| Depletion | Allocating the cost of a natural resource to expense over
the period in which the resource produces revenue
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| Deposit in transit | A deposit that is recorded in the cash receipts journal
but that reaches the bank too late to be shown on the monthly bank statement
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| Deposit slip | A form prepared to record the deposit of cash or checks
to a bank account
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| Depreciation | Allocation of the cost of a long-term asset to operations
during its expected useful life
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| Differential cost | The difference in cost between one alternative and
another
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| Direct charge-off method | A method of recording uncollectible account
losses as they occur
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| Direct costing | The accounting procedure whereby only variable costs
are included in the cost of goods manufactured, and fixed manufacturing costs
are written off as expenses in the period in which they are incurred
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| Direct expenses | Operating expenses that are identified directly with
a department and are recorded by department
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| Direct labor | The costs attributable to personnel who work directly on
the product being manufactured
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| Direct materials | All items that go into a product and become a part
of it
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| Direct method | A means of reporting sources and uses of cash under which
all revenue and expenses reported on the income statement appear in the operating
section of the statement of cash flows and show the cash received or paid out
for each type of transaction
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| Discount on bonds payable | The excess of the face value over the price
received by the corporation for a bond
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| Discounting | Deducting the interest from the principal on a note payable
or receivable in advance
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| Discussion memorandum | An explanation of a topic under consideration
by the Financial Accounting Standards Board
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| Dishonored check | A check returned to the depositor unpaid because of
insufficient funds in the drawer's account; also called an NSF check
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| Dissolution | The legal termination of a partnership
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| Distributive share | The amount of net income or net loss allocated
to each partner
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| Dividends | Distributions of the profits of a corporation to its shareholders
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| Donated capital | Capital resulting from the receipt of gifts by a corporation
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| Double-declining-balance method | A method of depreciation that uses a
rate equal to twice the straight-line rate and applies that rate to the book
value of the asset at the beginning of the year
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| Double-entry system | An accounting system that involves recording the
effects of each transaction as debits and credits
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| Draft | A written order that requires one party (a person or business)
to pay a stated sum of money to another party
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| Drawee | The bank on which a check is written
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| Drawer | The person or firm issuing a check
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| Drawing account | A special type of owner's equity account set up to record
the owner's withdrawal of cash from the business
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| Economic entity | A business or organization whose major purpose is to
produce a profit for its owners
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| Employee | A person who is hired by and works under the control and direction
of the employer
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| Employee's Withholding Allowance Certificate, Form W-4 | A form used to
claim exemption (withholding) allowances
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| Employer's Annual Federal Unemployment Tax Return, Form 940 or 940-EZ | Preprinted government form used by the employer to report unemployment taxes
for the calendar year
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| Employer's Quarterly Federal Tax Return, Form 941 | Preprinted government
form used by the employer to report payroll tax information relating to social
security, Medicare, and employee income tax withholding to the Internal Revenue
Service
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| Endorsement | A written authorization that transfers ownership of a check
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| Entity | Anything having its own separate identity, such as an individual,
a town, a university, or a business
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| Equity | An owner's financial interest in a business
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| Equivalent production | The estimated number of units that could have
been started and completed with the same effort and costs incurred in the department
during the same time period
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| Exempt employees | Salaried employees who hold supervisory or managerial
positions who are not subject to the maximum hour and overtime pay provisions
of the Wage and Hour Law
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| Expense | An outflow of cash, use of other assets, or incurring of a liability
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| Experience rating system | A system that rewards an employer for maintaining
steady employment conditions by reducing the firm's state unemployment tax rate
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| Exposure draft | A proposed solution to a problem being considered by
the Financial Accounting Standards Board
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| Extraordinary, nonrecurring items | Transactions that are highly unusual,
clearly unrelated to routine operations, and that do not frequently occur
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| Face interest rate | The contractual interest specified on the bond
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| Face value | An amount of money indicated to be paid, exclusive of interest
or discounts
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| Fair market value | The current worth of an asset or the price the asset
would bring if sold on the open market
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| Fair market value method | A method of recording the trade-in of an asset
that allows a loss to be recognized on the transaction if the book value exceeds
the trade-in allowance
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| Federal unemployment taxes (FUTA) | Taxes levied by the federal government
against employers to benefit unemployed workers
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| Financial statements | Periodic reports of a firm's financial position
or operating results
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| Financing activities | Transactions with those who provide cash to the
business to carry on its activities
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| Finished goods inventory | The cost of completed products ready for sale;
corresponds to the Merchandise Inventory account of a merchandising business
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| Finished goods subsidiary ledger | A ledger containing a record for each
of the different types of finished products
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| First in, first out (FIFO) method | A method of inventory costing that
assumes the oldest merchandise is sold first
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| Fixed budget | A budget representing only one level of activity
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| Fixed costs | Costs that do not change in total as the level of activity
changes
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| Flexible budget | A budget that shows the budgeted costs at various levels
of activity
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| Footing | A small pencil figure written at the base of an amount column
showing the sum of the entries in the column
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| Franchise | An intangible asset; a right to exclusive dealership granted
by a governmental unit or a business entity
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| Freight In account | An account showing transportation charges for items
purchased
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| Full disclosure principle | The requirement that all information that
might affect the user's interpretation of the profitability and financial position
of a business be disclosed in the financial statements or in footnotes to the
statements
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| Full endorsement | A signature transferring a check to a specific person,
firm, or bank
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| Fundamental accounting equation | The relationship between assets and
liabilities plus owner's equity
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| Gain | The disposition of an asset for more than its book value
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| General journal | A financial record for entering all types of business
transactions
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| General ledger | A permanent, classified record of all accounts used in
a firm's operation; a record of final entry
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| General partner | A member of a partnership who has unlimited liability
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| Generally accepted accounting principles (GAAP) | Accounting standards
developed and applied by professional accountants
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| Going concern assumption | The assumption that a firm will continue to
operate indefinitely
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| Goodwill | An intangible asset; the value of a business in excess of the
value of its identifiable assets
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| Governmental accounting | Accounting work performed for a federal, state,
or local governmental unit
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| Gross profit | The difference between net sales and the cost of goods
sold
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| Gross profit method | A method of estimating inventory cost based on the
assumption that the rate of gross profit on sales and the ratio of cost of goods
sold to net sales are relatively constant from period to period
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| Gross profit percentage | The amount of gross profit from each dollar
of sales (gross profit percentage = gross profit ÷ net sales)
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| High-low point method | A method to determine the fixed and variable components
of a semivariable cost
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| Historical cost principle | See Cost basis principle
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| Horizontal analysis | Computing the percentage change for individual
items in the financial statements from year to year
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| Hourly rate basis | A method of paying employees according to a stated
rate per hour
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| Impairment | A situation that occurs when the asset is determined to have
a market value or a value in use less than its book value
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| Income statement | A formal report of business operations covering a specific
period of time; also called a profit and loss statement or a statement of income
and expenses
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| Income Summary account | A special owner's equity account that is used
only in the closing process to summarize the results of operations
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| Income tax method | A method of recording the trade-in of an asset according
to tax rules that do not permit a gain or loss to be recognized on the transaction
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| Independent contractor | One who is paid by a company to carry out a specific
task or job but is not under the direct supervision or control of the company
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| Indirect expenses | Operating expenses that cannot be readily identified
and are not closely related to activity within a department
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| Indirect labor | Cost attributable to personnel who support production
are not directly involved in the manufacture of a product; for example, supervisory,
repair and maintenance, and janitorial staff
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| Indirect materials and supplies | Materials used in manufacturing a product
that do not become a part of the product
|
|
|
|
| Indirect method | A means of reporting cash generated from operating activities
by treating net income as the primary source of cash in the operating section
of the statement of cash flows and adjusting that amount for changes in current
assets and liabilities associated with net income, noncash transactions, and
other items
|
|
|
|
| Individual earnings record | An employee record that contains information
needed to compute earnings and complete tax reports
|
|
|
|
| Industry averages | Financial ratios and percentages reflecting averages
for similar companies
|
|
|
|
| Intangible assets | Assets that lack a physical substance, such as goodwill,
patents, copyrights, and computer software, although software has, in a sense,
a physical attribute
|
|
|
|
| Interest | The fee charged for the use of money
|
|
|
|
| Internal control system | A system designed to safeguard assets, achieve
efficient processing of transactions, and ensure accuracy and reliability of
financial records
|
|
|
|
| International accounting | The study of accounting principles used by
different countries
|
|
|
|
| Interpret | To understand and explain the meaning and importance of something
(such as financial statements)
|
|
|
|
| Inventory sheet | A form used to list the volume and type of goods a firm
has in stock
|
|
|
|
| Inventory turnover | The number of times inventory is purchased and sold
during the accounting period (inventory turnover = cost of goods sold ÷ average
inventory)
|
|
|
|
| Investing activities | Transactions that involve the acquisition or disposal
of long-term assets
|
|
|
|
| Invoice | A customer billing for merchandise bought on credit
|
|
|
|
| Job order | A specific order for a specific batch of manufactured items
|
|
|
|
| Job order cost accounting | A cost accounting system that determines the
unit cost of manufactured items for each separate production order
|
|
|
|
| Job order cost sheet | A record of all manufacturing costs charged to
a specific job
|
|
|
|
| Journal | The record of original entry
|
|
|
|
| Journalizing | Recording transactions in a journal
|
|
|
|
| Just-in-time system | An inventory system in which raw materials are ordered
so they arrive just in time to be placed into production
|
|
|
|
| Labor efficiency variance | See Labor time variance
|
|
|
|
| Labor rate variance | The difference between the actual labor rate per
hour and the standard labor rate per hour multiplied by the actual number of
hours worked on the job
|
|
|
|
| Labor time variance | The difference between the actual hours worked and
the standard labor hours allowed for the job multiplied by the standard cost
per hour
|
|
|
|
| Last in, first out (LIFO) method | A method of inventory costing that
assumes that the most recently purchased merchandise is sold first
|
|
|
|
| Ledger | The record of final entry
|
|
|
|
| Leveraged buyout | Purchasing a business by acquiring the stock and obligating
the business to pay the debt incurred
|
|
|
|
| Leveraging | Using borrowed funds to earn a profit greater than the interest
that must be paid on the borrowing
|
|
|
|
| Liabilities | Debts or obligations of a business
|
|
|
|
| Limited liability company (LLC) | Provides limited liability to the owners,
who can elect to have the profits taxed at the LLC level or on their individual
tax returns
|
|
|
|
| Limited liability partnership (LLP) | A partnership that provides some
limited liability for all partners
|
|
|
|
| Limited partner | A member of a partnership whose liability is limited
to his or her investment in the partnership
|
|
|
|
| Limited partnership | A partnership having one or more limited partners
|
|
|
|
| Liquidation | Termination of a business by distributing all assets and
discontinuing the business
|
|
|
|
| Liquidation value | Value of assets to be applied to preferred stock,
usually par value or an amount in excess of par value, if the corporation is
liquidated
|
|
|
|
| Liquidity | The ease with which an item can be converted into cash; the
ability of a business to pay its debts when due
|
|
|
|
| List price | An established retail price
|
|
|
|
| Long-term liabilities | Debts of a business that are due more than a year
in the future
|
|
|
|
| Loss | The disposition of an asset for less than its book value
|
|
|
|
| Lower of cost or market rule | The principle by which inventory is reported
at either its original cost or its replacement cost, whichever is lower
|
|
|
|
| Management advisory services | Services designed to help clients improve
their information systems or their business performance
|
|
|
|
| Managerial accounting | Accounting work carried on by an accountant employed
by a single business in industry
|
|
|
|
| Manufacturing business | A business that sells goods that it has produced
|
|
|
|
| Manufacturing cost budget | A budget made for each manufacturing cost
|
|
|
|
| Manufacturing margin | Sales minus the variable cost of goods sold
|
|
|
|
| Manufacturing overhead | All manufacturing costs that are not classified
as direct materials or direct labor
|
|
|
|
| Manufacturing overhead ledger | A subsidiary ledger that contains a record
for each overhead item
|
|
|
|
| Manufacturing Summary account | The account to which all items on the
statement of cost of goods manufactured are closed; similar to the Income Summary
account
|
|
|
|
| Marginal income | The manufacturing margin minus variable operating expenses
|
|
|
|
| Markdown | Price reduction below the original markon
|
|
|
|
| Market interest rate | The interest rate a corporation is willing
to pay and investors are willing to accept at the current time
|
|
|
|
| Market price | The price the business would pay to buy an item of inventory
through usual channels in usual quantities
|
|
|
|
| Market value | The price per share at which stock is bought and sold
|
|
|
|
| Markon | The difference between the cost and the initial retail price
of merchandise
|
|
|
|
| Markup | A price increase above the original markon
|
|
|
|
| Matching principle | The concept that revenue and the costs incurred
in earning the revenue should be matched in the appropriate accounting periods
|
|
|
|
| Materiality | The significance of an item in relation to a particular
situation or set of facts
|
|
|
|
| Materials price variance | The difference between the actual price and
the standard cost for materials multiplied by the actual quantity of materials
used
|
|
|
|
| Materials quantity variance | The difference between the actual quantity
used and the quantity of materials allowed multiplied by the standard cost of
the materials
|
|
|
|
| Materials requisition | A form that describes the item and quantity needed
and shows the job or purpose
|
|
|
|
| Materials usage variance | See Materials quantity variance
|
|
|
|
| Maturity value | The total amount (principal plus interest) that must
be paid when a note comes due
|
|
|
|
| Medicare tax | A tax levied on employees and employers to provide medical
care for the employee and the employee's spouse after each has reached age 65
|
|
|
|
| Memorandum entry | An informational entry in the general journal
|
|
|
|
| Merchandise inventory | The stock of goods a merchandising business keeps
on hand
|
|
|
|
| Merchandising business | A business that sells goods purchased for resale
|
|
|
|
| Merit rating system | See Experience rating system
|
|
|
|
| Minute book | A book in which accurate and complete records of all meetings
of stockholders and directors are kept
|
|
|
|
| Mortgage loan | A long-term debt created when a note is given as
part of the purchase price for land or buildings
|
|
|
|
| Multiple-step income statement | A type of income statement on which several
subtotals are computed before the net income is calculated
|
|
|
|
| Mutual agency | The characteristic of a partnership by which each partner
is empowered to act as an agent for the partnership, binding the firm by his
or her acts
|
|
|
|
| Negotiable | A financial instrument whose ownership can be transferred
to another person or business
|
|
|
|
| Negotiable instrument | A financial document containing a promise or order
to pay that meets all requirements of the Uniform Commercial Code in order to
be transferable to another party
|
|
|
|
| Net book value | The cost of an asset minus its accumulated depreciation,
depletion, or amortization, also known as book value
|
|
|
|
| Net income | The result of an excess of revenue over expenses
|
|
|
|
| Net income line | The worksheet line immediately following the column
totals on which net income (or net loss) is recorded in two places: the Income
Statement section and the Balance Sheet section
|
|
|
|
| Net loss | The result of an excess of expenses over revenue
|
|
|
|
| Net of discount | The invoice amount minus the cash discount offered
|
|
|
|
| Net price | The list price less all trade discounts
|
|
|
|
| Net sales | The difference between the balance in the Sales account and
the balance in the Sales Returns and Allowances account
|
|
|
|
| Net salvage value | The salvage value of an asset less any costs to remove
or sell the asset
|
|
|
|
| Net value of accounts receivable | The difference between the Accounts
Receivable account and the Allowance for Doubtful Accounts account
|
|
|
|
| Noncumulative preferred stock | Stock that conveys to its owners
the stated preference dividend for the current year but no rights to dividends
for years in which none were declared
|
|
|
|
| Nonparticipating preferred stock | Stock that conveys to its owners the
right to only the preference dividend amount specified on the stock certificate
|
|
|
|
| No-par-value stock | Stock that is not assigned a par value in the corporate
charter
|
|
|
|
| Normal balance | The increase side of an account
|
|
|
|
| Note payable | A liability representing a written promise by the maker
of the note (the debtor) to pay another party (the creditor) a specified amount
at a specified future date
|
|
|
|
| Note receivable | An asset representing a written promise by another party
(the debtor) to pay the note holder (the creditor) a specified amount at a specified
future date
|
|
|
|
| Objectivity assumption | The idea that financial reports are unbiased
and fair to all parties
|
|
|
|
| On account | An arrangement to allow payment at a later date; also called
a charge account or open-account credit
|
|
|
|
| Open-account credit | A system that allows the sale of services or goods
with the understanding that payment will be made at a later date
|
|
|
|
| Operating activities | Routine business transactions-selling goods or
services and incurring expenses
|
|
|
|
| Operating assets and liabilities | Current assets and current liabilities
|
|
|
|
| Opportunity cost | Potential earnings or benefits that are given up because
a certain course of action is taken
|
|
|
|
| Organization costs | The costs associated with establishing a corporation;
an intangible asset account
|
|
|
|
| Outstanding checks | Checks that have been recorded in the cash payments
journal but have not yet been paid by the bank
|
|
|
|
| Overapplied overhead | The result of applied overhead exceeding the actual
overhead costs
|
|
|
|
| Overhead application rate | The rate at which the estimated cost of overhead
is charged to each job
|
|
|
|
| Owner's equity | The financial interest of the owner of a business; also
called proprietorship or net worth
|
|
|
|
| Paid-in capital | Capital acquired from capital stock transactions
|
|
|
|
| Par value | An amount assigned by the corporate charter to each share
of stock for accounting purposes
|
|
|
|
| Participating preferred stock | Stock that conveys the right not only
to the preference dividend amount but also to a share of other dividends paid
|
|
|
|
| Partnership | A business entity owned by two or more persons who carry
on a business for profit and who are legally responsible for the debts and taxes
of the business
|
|
|
|
| Partnership agreement | A legal contract forming a partnership and specifying
certain details of operation
|
|
|
|
| Patent | An intangible asset; an exclusive right given by the U.S. Patent
Office to manufacture and sell an invention for a period of 17 years from the
date the patent is granted
|
|
|
|
| Payee | The person or firm to whom a check is payable
|
|
|
|
| Payment date | The date that dividends are paid
|
|
|
|
| Payment voucher | See Voucher
|
|
|
|
| Payroll register | A record of payroll information for each employee for
the pay period
|
|
|
|
| Periodic inventory | Inventory based on a periodic count of goods on hand
|
|
|
|
| Periodicity of income assumption | The concept that income should be reported
in certain time periods
|
|
|
|
| Permanent account | An account that is kept open from one accounting period
to the next
|
|
|
|
| Perpetual inventory | Inventory based on a running total of number of
units
|
|
|
|
| Perpetual inventory system | An inventory system that tracks the inventories
on hand at all times
|
|
|
|
| Petty cash analysis sheet | A form used to record transactions involving
petty cash
|
|
|
|
| Petty cash fund | A special-purpose fund used to handle payments involving
small amounts of money
|
|
|
|
| Petty cash voucher | A form used to record the payments made from a petty
cash fund
|
|
|
|
| Physical inventory | An actual count of the number of units of each type
of good on hand
|
|
|
|
| Piece-rate basis | A method of paying employees according to the number
of units produced
|
|
|
|
| Plant and equipment | Property that will be used in the business for longer
than a year
|
|
|
|
| Postclosing trial balance | A statement that is prepared to prove the
equality of total debits and credits after the closing process is completed
|
|
|
|
| Postdated check | A check dated some time in the future
|
|
|
|
| Posting | Transferring data from a journal to a ledger
|
|
|
|
| Preemptive right | A shareholder's right to purchase a proportionate amount
of any new stock issued at a later date
|
|
|
|
| Preference dividend | A basic or stated dividend rate for preferred stock
that must be paid before dividends can be paid on common stock
|
|
|
|
| Preferred stock | A class of stock that has special claims on the corporate
profits or, in case of liquidation, on corporate assets
|
|
|
|
| Premium on bonds payable | The excess of the price paid over the face
value of a bond
|
|
|
|
| Prepaid expenses | Expense items acquired, recorded, and paid for in advance
of their use
|
|
|
|
| Price-earnings ratio | The ratio of the current market value of common
stock to earnings per share of that stock
|
|
|
|
| Principal | The amount shown on the face of a note
|
|
|
|
| Private sector | The business sector, which is represented in developing
accounting principles by the Financial Accounting Standards Board (FASB)
|
|
|
|
| Process cost accounting | A cost accounting system whereby unit costs
of manufactured items are determined by totaling unit costs in each production
department
|
|
|
|
| Process cost accounting system | A method of accounting in which costs
are accumulated for each process or department and then transferred on to the
next process or department
|
|
|
|
| Production order | See Job order
|
|
|
|
| Profit center | A business segment that produces revenue
|
|
|
|
| Promissory note | A written promise to pay a specified amount of money
on a specific date
|
|
|
|
| Property, plant, and equipment | Long-term assets that are used in the
operation of a business and that are subject to depreciation (except for land,
which is not depreciated)
|
|
|
|
| Public accountants | Members of firms that perform accounting services
for other companies
|
|
|
|
| Public sector | The government sector, which is represented in developing
accounting principles by the Securities and Exchange Commission (SEC)
|
|
|
|
| Purchase allowance | A price reduction from the amount originally billed
|
|
|
|
| Purchase invoice | A bill received for goods purchased
|
|
|
|
| Purchase order | An order to the supplier of goods specifying items needed,
quantity, price, and credit terms
|
|
|
|
| Purchase requisition | A list sent to the purchasing department showing
the items to be ordered
|
|
|
|
| Purchase return | Return of unsatisfactory goods
|
|
|
|
| Purchases account | An account used to record cost of goods bought for
resale during a period
|
|
|
|
| Purchases discount | A cash discount offered to customers buying goods
for payment within a specified period
|
|
|
|
| Purchases journal | A special journal used to record the purchase of goods
on credit
|
|
|
|
| Qualitative characteristics | Traits necessary for credible financial
statements: usefulness, relevance, reliability, verifiability, neutrality, understandability,
timeliness, comparability, and completeness
|
|
|
|
| Quick assets | Cash, receivables, and marketable securities
|
|
|
|
| Ratio analysis | Computing the relationship between various items in the
financial statements
|
|
|
|
| Raw materials | The materials placed into production
|
|
|
|
| Raw materials ledger card | A record showing details of receipts and issues
for a type of raw material
|
|
|
|
| Raw materials subsidiary ledger | A ledger containing the raw materials
ledger cards
|
|
|
|
| Real property | Assets such as land, land improvements, buildings, and
other structures attached to the land
|
|
|
|
| Realization principle | The concept that revenue occurs when goods or
services, merchandise, or other assets are exchanged for cash or claims to cash
|
|
|
|
| Receiving report | A form showing quantity and condition of goods received
|
|
|
|
| Recognition | The determination of the period in which to record a business
transaction
|
|
|
|
| Record date | The date on which the specific stockholders to receive
a dividend are determined
|
|
|
|
| Recoverability test | Test for possible impairment that compares the asset's
net book value with the estimated net cash flows from future use of the asset
|
|
|
|
| Registered bonds | Bonds issued to a party whose name is listed in the
corporation's records
|
|
|
|
| Registrar | A person or institution in charge of the issuance and transfer
of a corporation's stock
|
|
|
|
| Reinstate | To put back or restore an accounts receivable amount that
was previously written off
|
|
|
|
| Relevant range of activity | The different levels of activity at which
a factory is expected to operate
|
|
|
|
| Replacement cost | See Market price
|
|
|
|
| Report form balance sheet | A balance sheet that lists the asset accounts
first, followed by liabilities and owner's equity
|
|
|
|
| Residual value | The estimate of the amount that could be obtained from
the sale or disposition of an asset at the end of its useful life; also called
salvage or scrap value
|
|
|
|
| Responsibility accounting | The process that allows management to evaluate
the performance of each segment of the business and assign responsibility for
its financial results
|
|
|
|
| Restrictive endorsement | A signature that transfers a check to a specific
party for a stated purpose
|
|
|
|
| Retail business | A business that sells directly to individual consumers
|
|
|
|
| Retail method | A method of estimating inventory cost by applying the
ratio of cost to selling price in the current accounting period to the retail
price of the inventory
|
|
|
|
| Retained earnings | The cumulative profits and losses of the corporation
not distributed as dividends
|
|
|
|
| Return on common stockholders' equity | A measure of how well the
corporation is making a profit for its shareholders; the ratio of net income
available for common stockholders to common stockholders' equity
|
|
|
|
| Revenue | An inflow of money or other assets that results from the sales
of goods or services or from the use of money or property; also called income
|
|
|
|
| Reversing entries | Journal entries made to reverse the effect of certain
adjusting entries involving accrued income or accrued expenses to avoid problems
in recording future payments or receipts of cash in a new accounting period
|
|
|
|
| Salary basis | A method of paying employees according to an agreed-upon
amount for each week or month
|
|
|
|
| Sales allowance | A reduction in the price originally charged to customers
for goods or services
|
|
|
|
| Sales discount | A cash discount offered by the supplier to customers
for payment within a specified period
|
|
|
|
| Sales invoice | A supplier's billing document
|
|
|
|
| Sales journal | A special journal used to record sales of merchandise
on credit
|
|
|
|
| Sales return | A firm's acceptance of a return of goods from a customer
|
|
|
|
| Salvage value | An estimate of the amount that could be received by selling
or disposing of an asset at the end of its useful life
|
|
|
|
| Schedule of accounts payable | A list of all balances owed to creditors
|
|
|
|
| Schedule of accounts receivable | A listing of all balances of the accounts
in the accounts receivable subsidiary ledger
|
|
|
|
| Schedule of operating expenses | A schedule that supplements the income
statement, showing the selling and general and administrative expenses in greater
detail
|
|
|
|
| Schedule of vouchers payable | A list of all amounts owed for unpaid vouchers
|
|
|
|
| Scrap value | See Residual value
|
|
|
|
| Secured bonds | Bonds for which property is pledged to secure the claims
of bondholders
|
|
|
|
| Semidirect expenses | Operating expenses that cannot be directly assigned
to a department but are closely related to departmental activities
|
|
|
|
| Semivariable costs | Costs that vary with, but not in direct proportion
to, the volume of activity
|
|
|
|
| Separate entity assumption | The concept that a business is separate
from its owners; the concept of keeping a firm's financial records separate
from the owner's personal financial records
|
|
|
|
| Serial bonds | Bonds issued at one time but payable over a period of years
|
|
|
|
| Service business | A business that sells services
|
|
|
|
| Service charge | A fee charged by a bank to cover the costs of maintaining
accounts and providing services
|
|
|
|
| Shareholder | A person who owns shares of stock in a corporation; also
called a stockholder
|
|
|
|
| Sight draft | A commercial draft that is payable on presentation
|
|
|
|
| Single-step income statement | A type of income statement where only one
computation is needed to determine the net income (total revenue - total expenses
= net income)
|
|
|
|
| Slide | An accounting error involving a misplaced decimal point
|
|
|
|
| Social entity | A nonprofit organization, such as a city, public school,
or public hospital
|
|
|
|
| Social Security Act | A federal act providing certain benefits for employees
and their families; officially the Federal Insurance Contributions Act
|
|
|
|
| Social security tax (FICA) | A tax imposed by the Federal Insurance Contributions
Act and collected on employee earnings to provide retirement and disability
benefits
|
|
|
|
| Sole proprietorship | A business entity owned by one person who is legally
responsible for the debts and taxes of the business
|
|
|
|
| Special journal | A journal used to record only one type of transaction
|
|
|
|
| Specific identification method | A method of inventory costing based
on the actual cost of each item of merchandise
|
|
|
|
| Stable monetary unit assumption | The concept that accounting records
are kept in terms of money and the assumption that the value of money is stable
|
|
|
|
| Standard cost card | A form that shows the per-unit standard costs for
materials, labor, and overhead
|
|
|
|
| Standard costs | A measure of what costs should be in an efficient operation
|
|
|
|
| State unemployment taxes (SUTA) | Taxes levied by a state government against
employers to benefit unemployed workers
|
|
|
|
| Stated value | The value that can be assigned to no-par-value stock by
a board of directors for accounting purposes
|
|
|
|
| Statement of account | A form sent to a firm's customers showing transactions
during the month and the balance owed
|
|
|
|
| Statement of cash flows | A financial statement that provides information
about the cash receipts and cash payments of a business
|
|
|
|
| Statement of cost of goods manufactured | A financial report showing
details of the cost of goods completed for a manufacturing business
|
|
|
|
| Statement of owner's equity | A formal report of changes that occurred
in the owner's financial interest during a reporting period
|
|
|
|
| Statement of partners' equities | A financial statement prepared to summarize
the changes in the partners' capital accounts during an accounting period
|
|
|
|
| Statement of retained earnings | A financial statement that shows all
changes that have occurred in retained earnings during the period
|
|
|
|
| Statement of stockholders' equity | A financial statement that provides
an analysis reconciling the beginning and ending balance of each of the stockholders'
equity accounts
|
|
|
|
| Statements of Financial Accounting Standards | Accounting principles established
by the Financial Accounting Standards Board
|
|
|
|
| Stock | Certificates that represent ownership of a corporation
|
|
|
|
| Stock certificate | The form by which capital stock is issued; the certificate
indicates the name of the corporation, the name of the stockholder to whom the
certificate was issued, the class of stock, and the number of shares
|
|
|
|
| Stock dividend | Distribution of the corporation's own stock on a pro
rata basis that results in conversion of a portion of the firm's retained earnings
to permanent capital
|
|
|
|
| Stock split | When a corporation issues two or more shares of new
stock to replace each share outstanding without making any changes in the capital
accounts
|
|
|
|
| Stockholders | The owners of a corporation; also called shareholders
|
|
|
|
| Stockholders of record | Stockholders in whose name shares are held
on date of record and who will receive a declared dividend
|
|
|
|
| Stockholders' equity | The corporate equivalent of owners' equity;
also called shareholders' equity
|
|
|
|
| Stockholders' ledger | See Capital stock ledger
|
|
|
|
| Straight-line amortization | Amortizing the premium or discount on bonds
payable in equal amounts each month over the life of the bond
|
|
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| Straight-line depreciation | Allocation of an asset's cost in equal amounts
to each accounting period of the asset's useful life
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| Subchapter S corporation (S corporation) | An entity formed as a
corporation that meets the requirements of Subchapter S of the Internal Revenue
Code to be treated essentially as a partnership, so that the corporation pays
no income tax
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| Subscribers' ledger | A subsidiary ledger that contains an account
receivable for each stock subscriber
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| Subscription book | A list of the stock subscriptions received
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| Subsidiary ledger | A ledger dedicated to accounts of a single type and
showing details to support a general ledger account
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| Sum-of-the-years'-digits method | A method of depreciating asset
costs by allocating as expense each year a fractional part of the asset's depreciable
cost, based on the sum of the digits of the number of years in the asset's useful
life
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| Sunk cost | A cost that has been incurred and will not change as a result
of a decision
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| T account | A type of account, resembling a T, used to analyze the effects
of a business transaction
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| Tangible personal property | Assets such as machinery, equipment, furniture,
and fixtures that can be removed and used elsewhere
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| Tax accounting | A service that involves tax compliance and tax planning
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| Tax-exempt wages | Earnings in excess of the base amount set by the Social
Security Act
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| Temporary account | An account whose balance is transferred to another
account at the end of an accounting period
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| Tickler file | See Unpaid voucher file
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| Time and a half | Rate of pay for an employee's work in excess of 40 hours
a week
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| Time draft | A commercial draft that is payable during a specified
period of time
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| Time ticket | Form used to record hours worked and jobs performed
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| Total equities | The sum of a corporation's liabilities and stockholders'
equity
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| Trade acceptance | A form of commercial time draft used in transactions
involving the sale of goods
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| Trade discount | A reduction from list price
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| Trade name | An intangible asset; an exclusive business name registered
with the U.S. Patent Office; also called brand name
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| Trademark | An intangible asset; an exclusive business symbol registered
with the U.S. Patent Office
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| Trading on the equity | See Leveraging
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| Transfer agent | A person or institution that handles all stock transfers
and transfer records for a corporation
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| Transfer price | The price at which one segment's goods are transferred
to another segment of the company
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| Transmittal of Wage and Tax Statements, Form W-3 | Preprinted government
form submitted with Forms W-2 to the Social Security Administration
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| Transportation In account | See Freight In account
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| Transposition | An accounting error involving misplaced digits in a number
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| Treasury stock | A corporation's own capital stock that has been issued
and reacquired; the stock must have been previously paid in full and issued
to a stockholder
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| Trend analysis | Comparing selected ratios and percentages over a period
of time
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| Trial balance | A statement to test the accuracy of total debits and credits
after transactions have been recorded
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| Underapplied overhead | The result of actual overhead costs exceeding
applied overhead
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| Unearned income | Income received before it is earned
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| Unemployment insurance program | A program that provides unemployment
compensation through a tax levied on employers
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| Units-of-output method | See Units-of-production method
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| Units-of-production method | A method of depreciating asset cost at the
same rate for each unit produced during each period
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| Unlimited liability | The implication that a creditor can look to all
partners' personal assets as well as the assets of the partnership for payment
of the firm's debts
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| Unpaid voucher file | A file to hold vouchers until they are due to be
paid, filed by due date
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| Updated account balances | The amounts entered in the Adjusted Trial Balance
section of the worksheet
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| Valuation account | An account, such as Allowance for Doubtful Accounts,
whose balance is revalued or reappraised in light of reasonable expectations
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| Variable costing | See Direct costing
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| Variable costs | Costs that vary in total in direct proportion to changes
in the level of activity
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| Variance analysis | Explains the difference between standard cost and
actual cost
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| Vertical analysis | Computing the relationship between each item on a
financial statement to some base amount on the statement
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| Voucher | A form used to authorize payment of an obligation
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| Voucher register | A journal used to record liabilities arising from business
transactions
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| Voucher system | A method of controlling liabilities and cash payments
based on vouchers
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| Wage and Tax Statement, Form W-2 | Preprinted government form that contains
information about an employee's earnings and tax withholdings for the year
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| Wage-bracket table method | A simple method to determine the amount of
federal income tax to be withheld using a table provided by the government
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| Weighted average method | See Average cost method
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| Wholesale business | A business that manufactures or distributes goods
to retail businesses or large consumers such as hotels and hospitals
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| Withdrawals | Funds taken from the business by the owner for personal
use
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| Withholding statement | See Wage and Tax Statement, Form W-2
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| Workers' compensation insurance | Insurance that protects employees against
losses from job-related injuries or illnesses, or compensates their families
if death occurs in the course of the employment
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| Work in process | Partially completed units in the production process
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| Work in process subsidiary ledger | A ledger containing the job order
cost sheets
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| Working capital | The measure of the ability of a company to meet its
current obligations; the excess of current assets over current liabilities
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| Worksheet | A form used to gather all data needed at the end of an accounting
period to prepare financial statements
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