Top 40 Accounting Terms to Know

Top 40 Accounting Terms to Know

Top 40 Accounting Terms to Know

It can often feel like accounting is its own language. With so many phrases, acronyms and organizations to recognize, we have created a cheat sheet to the 40 most commonly used accounting phrases worth knowing.

 

1. Debit:  An accounting entry to record a transaction where there is either an increase in assets and expenses or a decrease in liabilities, equity, and revenue.

2. Credit:  An accounting entry to record a transaction where there is either an increase in liabilities, equity, and revenue or a decrease in assets and expenses.

3. Double entry accounting method:  A method of recording transactions in which each transaction is entered into one or more accounts. The account debits must equal the account credits.

4. Cash basis accounting:  Accounting method by which revenues and expenditures are recorded when they are received and paid.

5. Accrual basis accounting:  Accounting method that reports income when earned and expenses when incurred, rather than only in the periods in which cash is received or paid by the company.

6. GAAP:  Stands for Generally Accepted Accounting Principles. GAAP represents a set of rules, conventions, and procedures set by the Financial Accounting Standards Board (FASB) to define accepted accounting practice in the United States.

7. Net worth:  Equal to the excess of assets over liabilities.

8. Book value:  Amount that an asset or liability shows on the balance sheet of a company.

9. Market value:  Amount the investors are willing to pay for a share of stock on the open market.

10. Preferred stock:  A type of capital stock that carries certain preferences over common stock, such as a priority claim on dividends and assets.

11. Common stock:  The value assigned to a company’s issued shares. This type of capital stock has no preferences, such as in terms of dividends or voting rights.

12. Bank reconciliation:  A comparison of the balance shown on the bank statement and the balance of the cash account in the company’s general ledger. Differences are identified and researched.

13. Write off:  Charging an asset account to expense or loss.

14. Bad debt:  Portion of an account, loan, or note considered to be uncollectible.

15. Contingent liability:  Potential liability arising from a past transaction or a subsequent event.

16. Appreciation:  Increase in the value of an asset such as a stocks, bonds, or real estate.

17. Depreciation:  Expense allowance made for wear and tear on an asset over its estimated useful life.

18. Amortization:   Allocation of the cost of an intangible asset over a period of time.

19. Salvage value:  Selling price assigned to retired fixed assets or merchandise that are unsellable through regular channels.

20. Asset:  What a company owns, such as any owned tangible or intangible item that has an economic value useful to the owner.

21. Liability:  What a company owes, or a company’s debts or financial obligations.

22. Owners’ or Stockholders’ equity:  An ownership interest in a corporation in the form of common stock or preferred stock.  Equal to total assets minus total liabilities.

23. Paid in capital:  The portion of the stockholders’ equity which was paid in by the stockholders, as opposed to capital arising from profitable operations.

24. Revenue:  Money received by the company for goods sold or services provided.

25. Expense: The fixed, variable, or accrued costs that a company incurs through its operations.

26. Net income:  A company’s net earnings or profit, equal to total revenue minus total expense.

27. General ledger:  A financial record that contains all the asset, liability, owner equity, revenue, and expense accounts.

28. Subsidiary ledger: A financial record that contains the details to support a general ledger control account.

29. Trial balance:  a financial record that lists and compares the totals of debit and credit balances in the general ledger to check that they are equivalent.

30. Chart of accounts:  A complete listing of every account in the general ledger of an organization.

31. Balance sheet:  A financial report that summarizes a company’s assets, liabilities, and owners’ or shareholders’ equity at a given time.

32. Profit and loss statement:  A financial report that is used to summarize a company’s performance by showing revenues and expenses during a specific period of time such as monthly, quarterly, or annually.  Also known as Income Statement.

33. Statement of cash flows:  A financial report that shows cash inflow and outflow from operating, investing, and financing activities.

34. Accounts receivable:  Money which is owed to a company by a customer for products and services that were provided on credit.

35. Accounts payable:  Money a company owes its creditors for delivered goods or services that were purchased on credit.

36. Fixed cost:  Costs that remain constant within a defined range of activity, volume, or time period.

37. Variable cost: Costs that change in direct proportion to changes in productive output.

38. Compilation: Presentation of financial statement data without the accountant’s assurance as to conformity with GAAP.

39. Review:  Accounting service that provides some assurance as to the reliability of financial information. However, it does not involve a CPA conducting an examination under GAAP.

40. Audit:  A professional examination of a company’s financial statement by a CPA to determine that the statement has been presented fairly and prepared using GAAP.

 

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By | 2017-09-26T12:41:16+00:00 September 26th, 2017|Categories: Blog|Tags: , |0 Comments

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