A-Z Accounting Definitions & Terms

Accounting Words – A Terms

Accounts Payable: Accounts of money you owe. A liability that is usually created when you’ve made a purchase on credit.

Accounts Receivable: Accounts of money owed to you for the sale of goods or services.

Accrual basis: A method of accounting where transactions are recorded as they occur regardless of when payment for that transaction is made or received

Accrued Assets: Assets from revenues earned but not yet received.

Accrued Expenses: A liability incurred during the accounting period for which payment has not been made.

Accumulated Depreciation: The running balance of the depreciation taken on an asset.

Accounts Receivable: Accounts of money owed to you for the sale of goods or services.

Aging: The grouping of like transactions by date. Example – sorting invoices by due date.

Adjusting Entries: Special accounting entries that are made when you close the books at the end of an accounting period to bring the ledger up to date.

Asset: Items that a business or individual owns or are owed.

Audit: The scrutinizing of accounting records and supporting documents for accuracy and completeness.

Audit trail: The information within the accounting system that reveals the effects of a transaction.


Accounting Words – B Terms

Bad Debt: An account or receivable that has been deemed unrecoverable and written-off.

Badwill (Negative Goodwill): The excess amount of fair value of an asset or assets over the purchase price.

Balance Sheet: A statement listing the total assets, liabilities, and owners’ equity; indicating the net worth of the company for the given time period.

Bonds Payable: A long-term liability that represents a promise to pay a sum of money plus interest at a maturity date (a designated date in the future).

Book Value of an Asset: Cost of the asset (the amount that was paid for it) minus accumulated depreciation.


Accounting Words – C Terms

Capital: The owner’s or owners’ rights to assets of a business.

Cash basis: An accounting method where transactions are recorded when the actual change of payment occurs, regardless of when the goods or services are delivered.

Cash equivalents: Highly liquid short-term investments. Examples include money-market funds and treasury bills.

Certified Financial Statements: Financial statements that have been audited and certified by a CPA.

Chart of accounts: A numerical listing of a business’s accounts.

Closing Entries: Journal entries made at the end of the period to return the balance in all accounts to zero and ready the account for the next reporting period..

Contra account: An account that follows another account and has a balance opposite of it. For example accumulated depreciation is a contra asset account; it would have a credit balance and be subtracted from the asset’s debit balance to obtain the book value or carrying amount of the asset.

Credit: An entry on the right side of an account – decreases assets or increases liabilities.


Accounting Words – D Terms

Debit: An entry on the left side of an account – increases assets or decreases liabilities.

Depreciation: The allocation of the cost of a tangible, long-term asset over its useful life.

Dividends: Distributions by a corporation to its shareholders. Dividends decrease both the assets and retained earnings of the corporation.


Accounting Words – E Terms

Expenses: The daily costs incurred in running a business.

Extraordinary Gain or Loss: A gain or loss that is both unusual and infrequent.


Accounting Words – F Terms

Finished Goods Inventory: Completed goods held in inventory that have not yet been sold.

Fiscal: A 12 month accounting period. Not necessarily a calendar year.

Form 941: The IRS form filed quarterly to report income tax, FICA, and Medicare withholdings.

Form 1099: An IRS form sent to certain vendors whom you have paid more than $600 during the year.


Accounting Words – G Terms

General Ledger: The master record of all the balance sheet and income statement account balances.

General partnership: A partnership form of business where each partner is a part owner and shares in the privileges and risks of ownership.

Gross profit: The amount of net sales minus the amount of cost of goods sold (also called cost of sales).


Accounting Words – H Terms

NA


Accounting Words – I Terms

Income statement: A statement that summarizes revenues and expenses.

Intangibles: Assets that have no physical form but that have value. Examples are copyrights and patents.

Invoice: A form, sent from the seller to the buyer, listing the items bought, price, terms etc.


Accounting Words – J Terms

Journal: A chronological record of transactions, also known as the book of original entry.

Just-in-Time: A system where items are produced or received just in time to be used or sold.


Accounting Words – K Terms

NA


Accounting Words – L Terms

Ledger: A book containing accounts to which debits and credits are posted from books of original entry.

Liability: A debt or obligation.


Accounting Words – M Terms

NA


Accounting Words – N Terms

Net sales: The amount left when returns, discounts, and allowances are deducted from sales revenue.

Note payable: A written promise to pay a determined amount in the future.


Accounting Words – O Terms

Operating Expenses: The expenses that are incurred from the daily operation of the business.

Owners’ equity: The owners’ right to the assets of an entity.


Accounting Words – P Terms

Prepaid Expenses: Amounts that are paid in advance for product is not used up during the accounting period.

Post: The process of transferring amounts from a journal to the appropriate ledger accounts.

Purchase order: Written instructions to a vendor to ship and bill for the listed items.


Accounting Words – Q Terms

NA


Accounting Words – R Terms

Retained earnings: Capital earned operations of the corporation.

Reversing Entry: An entry made to reverse a prior entry.

Revenue: Amounts earned by delivering goods or services to customers.


Accounting Words – S Terms

NA


Accounting Words – T Terms

Trial Balance: A work sheet showing the balances in each account; used to prove the equality of debits and credits.


Accounting Words – T Terms

Trial Balance: A work sheet showing the balances in each account; used to prove the equality of debits and credits.


Accounting Words – U Terms

NA


Accounting Words – V Terms

NA


Accounting Words – W Terms

NA


Accounting Words – X Terms

NA


Accounting Words – Y Terms

NA


Accounting Words – Z Terms

NA