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| Accounting | a system that measures the business's activities in financial terms, provides written reports and financial statements about those activities, and communicates these reports to decision makers and others. |
| Assets | Properties (resources) of value owned by a business (cash, supplies, equipment, land) |
| Bookkeeping | The recording function of the accounting process. |
| Corporation | A type of business organization that is owned by stockholders. Stockholders usually are not personally liable for the corporation's debts. |
| Creditor | Someone who has a claim to assets |
| Equities | The rights or financial claim of creditors (liabilities) and owners (owner's equity) who supply the assets to a firm. |
| service company | A business that provides a service. |
| Liabilities | Obligations that come due in the future. |
| Manufacturer | Business that makes a product and sells it to its customers |
| Merchandise company | Business that buys a product from a manufacturing company to sell to its customers. |
| Owner's equity | Rights or financial claims to the assets of a business. |
| Partnership | A form of business organization that has at least two owners. The partners usually are personally liable for the partnership's debts. |
| Sole proprietorship | A type of business organization that has one owner. The owner is personally liable for paying the business's debts. |
| GAAP | The procedures and guidelines that must be followed during the accounting process |
| Accounts payable | Amounts owed to creditors that result from the purchase of goods or services on account--a liability |
| Balance sheet | A statement, as of a particular date, that show the amount of assets owned by a business as well as the amount of claims (liabilities and owner's equity) against these assets. |
| Basic accounting equation | Assets=Liabilities+Owner's Equity |
| Capital | The owner's investment of equity in the company |
| Shift in assets | A shift that occurs when the composition of the assets has changed but the total of the assets remains the same. |
| Supplies | One type of asset acquired by a firm; it has a much shorter life than equipment |
| Statement of financial position | A statement, as of a particular date, that show the amount of assets owned by a business as well as the amount of claims (liabilities and owner's equity) against these assets. |
| Accounts receivable | An asset that indicates amounts owed by customers. |
| Expanded accounting equation | Assets=liabilities+capital-withdrawals+revenue-expenses |
| Expense | A cost incurred in running a business by consuming goods or services in producing revenue |
| Net Income | When revenue totals more than expenses. |
| Net loss | When expenses total more than revenue. |
| Revenue | An amount earned by performing services for customers or selling goods to customers; it can be in the form of cash or accounts receivable |
| Withdrawals | A subdivision of owner's equity that records money or other assets an owner withdraws from a business for personal use. |
| Income statement | An accounting statement that details the performance of a firm (revenue minus expenses) for a specific period of time |
| Statement of owner's equity | A financial statement that reveals the change in capital. |
| compound entry | A transaction involving more than one debit or credit |
| double-entry bookkeeping | An accounting system in which the recording of each transaction affects two or more accounts and the total of the debits is equal to the total of the credits. |
| account | An accounting device used in bookkeeping to record increases and decreases of business transactions relating to individual assets, liabilities, capital, withdrawals, revenue, expenses, and so on. |
| credit | The right-hand side of any account. |
| debit | The left-hand side of any account. |
| ending balance | The difference between footings in a T account |
| chart of accounts | A numbering system of accounts that lists the account titles and account numbers to be used by a company. |
| ledger | A group of accounts that records data from business transactions. |
| normal balance of an account | The side of an account that increases by the rules of debit and credit. |
| standard account | A formal account that includes columns for date, explanation, posting reference, debit, and credit. |
| T account | A skeleton version of a standard account, used for demonstration purposes. |
| trial balance | A list of the ending balances of all the accounts in a ledger. |
| footings | The totals of each side of a T account. |
| accounting cycle | For each accounting period, the process that begins with the recording of business transactions or procedures into a journal and ends with the completion of a post-closing trial balance. |
| transposition | The accidental rearrangement of digits of a number. |
| calendar year | A one-year period beginning on January 1 and ending on December 31. |
| compound journal entry | A journal entry that affects more than two accounts. |
| fiscal year | The 12-month period a business chooses for its accounting year. |
| interim reports | Financial statements that are prepared for a month, quarter, or some other portion of the fiscal year |
| journal | A listing of business transactions in chronological order. The journal links on one page the debit and credit parts of transactions. |
| journal entry | The transaction (debits and credits) that is recorded into a journal once it is analyzed. |
| journalizing | The process of recording a transaction entry into the journal. |
| posting | The transferring, copying, or recording of information from a journal to a ledger. |
| slide | The error that results in adding or deleting zeros in the writing of a number. |
| trial balance | An informal listing of the ledger accounts and their balances in the ledger to aid in proving the equality of debits and credits. |
| accounting period | The period of time for which an income statement is prepared. |
| Adjusting | The process of calculating the latest up-to-ate balance of each account at teh end of an accounting period. |
| worksheet | A columnar device used by accountants to aid them in completing the accounting cycle-- often just referred to as "spreadsheet." It is not a formal report. |
| accrued salaries payale | Salaries that are earned by employees but unpaid and unrecorded during the period (and thus need to be recorded by an adjustment) and will not come due for payment until the next accounting period. |
| residual value | Estimated value of an asset after all the allowable depreciation has been taken. |
| book value | Cost of equipment less accumulated depreciation. |
| depreciation | The allocation (spreading) of the cost of an asset (such as an auto or equipment) over its expected useful life. |
| historical cost | The actual cost of an asset at time of purchase. |
| accumulated depreciation | A contra-asset account that summarizes or accumulates the amount of depreciation that has been taken on an asset. |
| adjusting journal entries | Journal entries that are needed in order to update specific ledger accounts to reflect correct balances at the end of an accounting period. |
| closing journal entries | Journal entries that are prepared to (a) reset all temporary accounts to a zero balance and (b) update Capital to a new balance. |
| post-closing trial balance | The final step in the accounting cycle that lists only permanent accounts in the ledger and their balances after adjusting and closing entries have been posted. |
| permanent accounts | Accounts whose balances are carried over to the next accounting period. Examples: Assets, Liabilities, Capital. |
| temporary accounts | Accounts whose balances at the end of an accounting period are not carried over to the next accounting period. |
| income summary | A temporary account in the ledger that summarizes revenue and expenses and transfers the balance (net income or net loss) to Capital. This account does not have a normal balance, i.e. it could have a debit or credit balance. |
