Summary Of Accounting Terms Accountant

Unit 11 Handout 1 Summary of Accounting Terms Accountant – an individual who uses the data for interpretation of their effects to the business. Accounting – a systematic follow-through in documenting financial transactions of business properties and obligations. Accounting - the process of measuring and recording the financial information of assets and liabilities of a business. Accounting concepts – known as the building blocks of GAAP that are broken into assumptions, principles, and conventions. Accounting Cycle – a systematic follow-through of recording and reporting financial transactions. It is the recording and reporting of all business activities during a time period. Accounting equation – Assets less Liabilities equals Equity. Accounts - used for recording transactions of the three elements of the business. It is used to track the changes of transactions that are similar in nature. Accounts Receivable – the right to the future collection of money. It is a current asset account that includes transactions that have not been paid by business customers resulting from sale of goods or rendering services. Accumulated depreciation – this contra-account for depreciable fixed assets is used to maintain the reduction of value of an item over time or usage known as depreciation. Adjusted Trial balance - This is the summary of balances of general ledger accounts after the adjusting entries. After-Closing Trial Balance - the summary of balances of general ledger accounts after the closing entries. Allowance for Bad Debts – this account is also known as “Allowance for Uncollectible Accounts.” Management’s estimate is based on historical data. This account decreases the value of the accounts receivable. Allowance for Uncollectible Accounts – this account is based on the estimates of accounts receivable that are most likely not collectible. This account decreases the accounts receivable account, known as “contraaccount of accounts receivable.” Asset – one of the three elements of the business. It is item of value owned by the business. Auditing - the review of financial statements’ fairness and adherence to Generally Accepted Accounting Principles (GAAP). Bad debts expense – this account is used as a portion of accounts receivable that is deemed uncollectible. This is an expense account; thereby, it decreases equity. Balance Sheet - reports the itemized list of balances assets, liabilities and owner’s equity on a specified date. Big Four - the largest public accounting firms in the United States.

Bonds Payable – this account is used for bonds issued by a company to another company with a maturity of more than one year. A bond is a formal promise to pay the face amount on the bonds on the maturity date and its corresponding interest with payment terms indicated on the bond. Bookkeeper - An individual who strategically records the financial transactions of a business. Building – this fixed asset account represents transactions involving the purchase of a building. For purchases including both land and building, the land portion should be recorded to a “land” account. Capital – this account is used to group transactions of the owners. Cash – a current asset account that includes transactions that have a form of exchange to buy things or services. This account includes money (coins, checks, money orders, etc.) and bank accounts (checking account, savings account, etc.) Cash Sales – refers to receiving of payment in cash at the time of sale. Chart of Accounts – listing of all accounts by title and arranged in numerical order. Common Stock – represents stocks owned by stockholders who share in a Corporation’s distribution of remaining profits after preferred stock dividends. Conservatism – to choose accounting methods that decrease income, or that increase expenses, when options to apply more than one equally acceptable accounting method is encountered. Conventions - commonly observed practices. Copyright – an intangible asset

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