Accounting terms-Part 2

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41 Terms

1

asset

property or economic resources owned by a business or individual

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2

liability

amounts owed to creditors; claims of creditors to the assets of a business

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3

owner's equity

total assets of the business minus liabilities; remaining funds are categorised as owner's equity

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4

cash

paper money, coin, bank balances, checks, etc., usually a current asset, but if use is restricted, could be a long term asset

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5

skimming

failure to report all cash receipts in order to evade income taxes

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6

separation of duties

money handling duties (cashier) separate from recording duties (book-keeping)

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7

deposits in transit

bank has not yet recorded company's deposit on books

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8

outstanding checks

checks that have been written, but have not yet cleared the bank

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9

overdraft

this happens when a check is written for more money than is deposited in the account

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10

petty cash fund

fund for purchases of the small variety; employees make purchases and submit receipts for reimbursement.

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11

accounts receivable

money owed to a company by it's debtors

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12

inventory

merchandise a firm holds or manufactures

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13

land

any property a firm owns and uses for operations

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14

equipment

office equipment, furniture, fixtures, etc. (CNC mills, tools, chairs)

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15

intangible assets

assets that cannot be physically touched (trademarks, patents, copyrights)

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16

patent

exclusive right to the use of an invented asset

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17

copyright

exclusive right to the use of something written, such as music, or a book

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18

depletion

deprecation of natural resources

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19

franchises

the right granted to sell services in a certain manner allowed by a government or by private firm

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20

accounts payable

money owed to a company by it's creditors

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21

accounting

an information system relating to the financial activities of a business

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22

cash basis accounting

report revenues when cash is received, report expenses when cash is paid

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23

accrual basis accounting

report revenue in the period when cash is earned

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24

basic accounting equation

assets = liabilities + owner's equity; show's relationship between assets and total equity

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25

equity

in finance, in general, you can think of equity as ownership in any asset after all debts associated with that asset are paid off; for example, a car or house with no outstanding debt is considered the owner's equity because he or she can readily sell the item for cash

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26

business transaction

a business event, such as buying, selling, or exchange of goods that causes a change in assets, liabilities, or equity

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27

capital

money invested in a business by an owner or shareholders; owner's equity in a business; the owner's claim or right to a business asset or assets

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28

credit

an agreement to pay for a purchase at a later time; entered on the right side of a T account

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29

creditor

a person or business to which money is owed

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30

expense

cost of goods or services that are used to operate a business; expenses decrease owners equity

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31

on account

buying on credit; agreeing to pay for a product or service at a later date

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32

property

items of value that are owned or controlled by a business; economic resources of a business

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33

property rights

creditor's or owner's financial claims to assets of a business

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34

revenue

income earned by a business from it's operations; revenue increases owner's equity, assuming expenses remain constant or do not exceed the increase in revenue

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35

withdrawal

removal of cash or other assets from a business or account

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36

merchandise sold equation

beginning merchandise inventory + net purchases = cost of merchandise available for sale - ending merchandise inventory = cost of merchandise available for sale

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37

gross profit equation

net sales - cost of merchandise sold = gross profit equation

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38

net purchases equation

purchases + transportation in - purchases discounts - purchases returns and allowances = net purchases

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39

net sales equation

sales - sales discounts - sales returns and allowances = net sales

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40

component percentage of net income

net income / sales

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41

component percentage of gross profit

gross profit / sales

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