Accounting

Accounting Standards Codification

The source of authoritative U.S. GAAP

Accounting

The process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties

Accounting Standards Update

Changes to Accounting Standards Codification are communicated through Accounting Standards Update covering approximately 90 topics

Accounting system

A process designed to accumulate, classify, and summarize financial data

Auditing

The review of financial statements to assess their fairness and adherence to generally accepted accounting principles

Auditors Report

An independent accountant’s review of a firm’s financial statements

Certified Bookkeeper (CB)

A designation that assures an individual possesses the level of knowledge and skill needed to carry out all key functions through the adjusted trial balance, including payroll

Certified public accountant (CPA)

An independent accountant who provides accounting services to the public for a fee

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

creditor

One to whom money is owed

Discussion memorandum

An explanation of a topic under consideration by the Financial Accounting Standards Board

Economic entity

A business or organization whose major purpose is to produce a profit for its owners

Entity

Anything having its own separate identity, such as an individual, a town, a university, or a business

Exposure draft

A proposed solution to a problem being considered by the Financial Accounting Standards Board

Financial statements

Periodic reports of a firm’s financial position or operating results

Fruad

Intentional or reckless acts that result in confiscation of a firm’s assets or the misrepresentation of the firm’s accounting data

Generally accepted accounting principles (GAAP)

Accounting standards developed and applied by professional accountants

Internal control

A company’s policies and procedures to safeguard assets, ensure reliability of accounting data, and promote compliance with management policies and applicable laws

International accounting

The study of accounting principles used by different countries

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; the branch of accounting that provides financial information about business segments, activities, or products

Partnership

A business entity owned by two or more people who carry on a business for profit and who are legally responsible for the debts and taxes of the business

Public accountants

Members of firms that perform accounting services for other companies

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

Social entity

A nonprofit organization, such as a city, public school, or public hospital

Sole proprietorship

A business entity owned by one person, who is legally responsible for the debts and taxes of the business

Statements of Financial Accounting Standards

Accounting principles established by the Financial Accounting Standards Board

Stock

Certificates that represent ownership of a corporation

Stockholders

The owners of a corporation; also called shareholders

Tax accounting

A service that involves tax compliance and tax planning

Sarbanes-Oxley Act

Passed in 2003 by bush after Enron. Most far reaching act to stop financial fraud. A member of the former big 5 fell now the big 4. The act created a 5 person public accounting act.

Accounting Standards Codification

The source of authoritative U.S. GAAP

Accounting Standards Update

Changes to Accounting Standards Codification are communicated through Accounting Standards Update covering approximately 90 topics

Auditor’s report

An independent accountant’s review of a firm’s financial statements

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

Creditor

One to whom money is owed

Discussion memorandum

An explanation of a topic under consideration by the Financial Accounting Standards Board

Economic entity

A business or organization whose major purpose is to produce a profit for its owners

Entity

Anything having its own separate identity, such as an individual, a town, a university, or a business

Exposure draft

A proposed solution to a problem being considered by the Financial Accounting Standards Board

Generally accepted accounting principles (GAAP)

Accounting standards developed and applied by professional accountants

International accounting

The study of accounting principles used by different countries

Partnership

A business entity owned by two or more people who carry on a business for profit and who are legally responsible for the debts and taxes of the business

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

Social entity

A nonprofit organization, such as a city, public school, or public hospital

Sole proprietorship

A business entity owned by one person, who is legally responsible for the debts and taxes of the business

Statements of Financial Accounting Standards

Accounting principles established by the Financial Accounting Standards Board

Stock

Certificates that represent ownership of a corporation

Stockholders

The owners of a corporation; also called shareholders

Accounts Payable

Amounts a business must pay in the future

Accounts receivable

Claims for future collection from customers

asset

Property owned by a business

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

Capital

Financial investment in a business; equity

Expense

An outflow of cash, use of other assets, or incurring of a liability

Fundamental accounting equation

The relationship between assets and liabilities plus owner’s equity assets=equity+liability

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

Liabilities

Debts or obligations of a business

Net Income

The result of an excess of revenue over expenses

On account

An arrangement to allow payment at a later date; also called a charge-account or open-account credit

Owners Equity

The financial interest of the owner of a business; also called proprietorship or net worth

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

Statement of owner equity

A formal report of changes that occurred in the owner’s financial interest during a reporting period

Withdraws

Funds taken from the business by the owner for personal use

Business Transaction

A financial event that changes the resources of a firm

Revenue is increases owner equity

Expenses decrease owner equity

Account balance

The difference between the amounts recorded on the two sides of an account

Accounts

Written records of the assets, liabilities, and owner’s equity of a business

Chart of Accounts

A list of the accounts used by a business to record its financial transactions

classification

A means of identifying each account as an asset, liability, or owner’s equity

Credit

An entry on the right side of an account

Debit

An entry on the left side of an account

Double entry system

An accounting system that involves recording the effects of each transaction as debits and credits

Drawing account

A special type of owner’s equity account set up to record the owner’s withdrawal of cash from the business

Footing

A small pencil figure written at the base of an amount column showing the sum of the entries in the column

Normal Balance

The increase side of an account

Permanent Account

An account that is kept open from one accounting period to the next

Slide

An accounting error involving a misplaced decimal point

T account

A type of account, resembling a T, used to analyze the effects of a business transaction

Temporary Account

An account whose balance is transferred to another account at the end of an accounting period

Transposition

An accounting error involving misplaced digits in a number

Trial Balance

A statement to test the accuracy of total debits and credits after transactions have been recorded

Chart of accounts

A list of the accounts used by a business to record its financial transactions

Credit

An entry on the right side of an account

Double entry system

An accounting system that involves recording the effects of each transaction as debits and credits

permanent account

An account that is kept open from one accounting period to the next

Trial Balance

A statement to test the accuracy of total debits and credits after transactions have been recorded

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

Audit Trail

A chain of references that makes it possible to trace information, locate errors, and prevent fraud

Balance Ledger Form

A ledger account form that shows the balance of the account after each entry is posted

Compound entry

A journal entry with more than one debit or credit

Correcting Entry

A journal entry made to correct an erroneous entry

General Journal

A financial record for entering all types of business transactions; a record of original entry

Journal

The record of original entry

Journalizing

Recording transactions in a journal

Ledger

The record of final entry

Posting

Transferring data from a journal to a ledger

Balance Ledger Form

A ledger account form that shows the balance of the account after each entry is posted

Correcting Entry

A journal entry made to correct an erroneous entry

General Ledger

A permanent, classified record of all accounts used in a firm’s operation; a record of final entry