Comprehensive ACCY4201 Accounting Glossary for Students

Accounting software

Software that does various accounting and bookkeeping tasks, stores business' financial data and can also be used to perform business transactions.

Accounts payable

The amount of money a business owes creditors (suppliers and so on) in return for goods and/or services received by the business.

Accounts receivable

The amount of money owed to the business by customers or clients after delivery/use of goods/services. Also known as receivables, trade debtors, or AR.

Adjusted trial balance

An internal document that lists the general ledger account titles and their balances after any adjustments have been made. The total amount of the debit balances must be equal to the total amount of credit balances.

Assets

Something owned by the entity which will be used in the business and used to generate revenue.

Audit

An official inspection of a business's accounts, typically by an independent accountant.

Balance day adjustments

Adjustments that need to be made on some accounts at the end of the financial year, so that they accurately reflect the position of the business.

Balance sheet

A financial report that summarises a business's assets (what it owns), liabilities (what it owes), and owner or shareholder equity at a given time. Also known as a statement of financial position.

Bookkeeping

Term used to describe the recording and organisation of financial data. Typically consists of payroll, invoicing, receipts and bills and recording business transactions.

Business accounting

The systematic recording, analysing, interpreting and presentation of financial information.

Capital

Includes cash and other assets introduced by the owners into a business which is normally as separate components, and then as a total capital figure or opening capital - it represents the ownership in a company.

Capital investment opportunities

Investment in long-term business assets.

Cash flow statement

A financial report that shows where money has come from and where it is going to. Also known as statement of cash flow, or CFS. Unlike an income statement, a cash flow statement only includes spendable money.

Cash flow, cash flow management

The revenue or expense expected to be generated through business activities. The process for tracking how much money is coming into and out of the business.

Chart of Accounts

A listing of all accounts available to be used to record accounting entries, typically in numerical order (binary code) and grouped into the five accounting elements: assets, liabilities, equity, revenue and expenses.

Computational errors

Numerical mistakes or mistakes made with accounts or debits or credits.

Credit

An accounting entry that may either decrease assets or increase liabilities and equity on the balance sheet.

Current assets

Assets that will be converted to cash within one year, such as cash, inventory, accounts receivable.

Debit

An accounting entry where there is either an increase in assets or a decrease in liabilities on a balance sheet.

Depreciation

The allocation of the cost of a long-term asset (as an expense) over its useful life.

Double-entry accounting

In the double-entry system, transactions are recorded in terms of debits and credits. Since a debit in one account offsets a credit in another, the sum of all debits must equal the sum of all credits. This makes it easier to prepare accurate financial statements and detect errors.

Equity, Owner's equity

Equity is assets minus liabilities. It is the owner's investment in the business minus the owner's drawings (or withdrawals) from the business plus the net income (or minus for a net loss) since the business began.

Executive summary

A simplified, condensed version of a longer document. It should contain the purpose and goals of the business.

Expenses

The fixed, variable, accrued, or day-to-day costs that a business incurs in its operation to sell goods or services. Types of expenses include: fixed expenses, such as rent that happens regularly; variable expenses, such as labour cost (may change in a given time period); accrued expenses, an incurred expense that has not yet been paid; operational expenses, such as advertising, insurances, wages and so on.

Financial accounting

Information that appears in financial statements primarily for external use; for example, investors, creditors, although management can use the information for certain internal decisions. The information is used by external parties when making decisions about increasing/decreasing investment or to extend credit.

Financial reporting

A formal process to track analyse and report a business's income for the purpose of providing information to investors, tracking cash flow, analysing assets, liabilities and owner's equity.

Financial statement

A report that shows the financial information of a business. There are four main types: balance sheet, profit and loss statement, cash flow statement, statement of movements in equity.

Fixed assets

Any asset that cannot be easily converted to cash. Typically tangible, physical things that have an economic life of longer than a year, such as buildings, vehicles, furniture, office equipment.

Gross profit

The amount of money a business makes from sales after deducting the cost of making and selling their product and before operating costs, payroll, tax and overheads are paid.

Income

Revenue earnt by the business by selling goods or services.

Income statement, Profit and Loss statement, statement of operations, statement of earnings, P&L

Shows how much a business has spent and earnt over a specified time, and whether there has been a profit or loss over the same time period. Variously known as income statement, statement of operations, statement of earnings, profit and loss statement, or P&L.

Liabilities

A business' debts or financial obligations incurred during business operations.

Current liabilities

Debts that are payable within a year.

Long-term liabilities

Debts that are typically paid over a period of time, greater than 1 year.

Managerial accounting

Information used by internal managers for activities including long-range planning and explanations of cost variances.

Materially false

Information in a statement that could impact the judgement of someone relying on the financial information to make decisions.

Net income

The total amount of profit a business makes after deducting expenses such as cost of sales, overheads and tax.

Net profit margin

Shows what percentage of sales is actual profit. Net income ÷ total sales = net profit margin.

Non-zero balances

A positive amount in the debit or credit column of a trial balance.

Retained earnings

The profits left in the business that are accumulated over time from previous reporting periods.

Separation of duties

Breaking down tasks so more than one person is required to complete a task, intended to prevent fraud and error.

Statement of movements in equity

A financial statement that explains the changes in an organisation's capital, accumulated reserves and retained earnings over the reporting period.

Taonga

Māori arts and crafts.

Tax accounting

Accounting methods that focus on taxes rather than the appearance of public financial statements, governed by the IRD.

Trial balance

A business document in which all ledgers are compiled into debit and credit columns to ensure the bookkeeping system is mathematically correct.

Unadjusted trial balance

The listing of the general ledger account balances at the end of a reporting period, before any balance day adjustments.

Whakataukī

A Māori proverb or saying.

Working capital

The amount of cash a business has after factoring in short-term debts; current assets less current liabilities.

Income statement

Statement of financial performance; profit and loss.

Revenue/Income

Sales.

Equity

Owner's equity; Capital; Proprietorship.

Net profit

Net income.

On credit

On account.