Accounting Definitions Ch 1-5

Sole Trader

an individual who owns his or her own business

unlimited liability

full responsibility for the debts of the business

bankruptcy

when someone is judged to be unable to pay their liabilities by a court or law

capital or equity

money invested in the business by the owner(s)

deed of partnership

a formal agreement to begin a partnership

limited partnership

a type of partnership where partners are responsible for the partnerships debts only up to the amount they originally invested

drawings

money taken from the business by the owner

incorporation

the official listing

of a company by meeting certain legal requirements that apply in a particular country or a particular state; companies that are incorporated become corporations

limited liability

the legal responsibility to pay only a limited amount of debt if something bad happens to you or your company

divorce of ownership

when shareholders are owners of the business, but they are not necessarily involved in the day-to-day running of the business

auditor

an independent accountant who examines the accounts of a limited company on behalf of the owners to see if they show a 'true and fair' view of how the business is performing

Double entry

the accounting system in which each transaction is recorded twice, as a debit in one account and as a credit in another

Income Statement

a statement of all income and expenses recognised during a specified period

Statement of Financial Position

shows the value of a business on a specific date, including the assets, liabilities and capital or equity

Remittance

an amount of money that you send to pay for something

Payroll packages

a software package that allows a firm to organize its staff wages and income tax

financial statements

documents produced by an organisation to show the financial status of a business at a particular time, including the income Statement and Statement of Financial Position

claimant

someone who claims something, especially money, from the government, a court, etc., because they think they have a right to it

countersign

sign a paper that has already been signed by someone else

book of original entry

the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced

business documents

documents used when processing the sale or purchase of goods and services

Back up

to make a copy of information stored on a computer