Accounting Glossary Terms

Accountancy - This is the measurement of financial information used primarily by investors, tax authorities and managers for assurance reasons and decision making processes. Accountancy is also referred to as accounting which is commonly known as the “language of business".

Accounts Payable - A record of what a company owes, money designated for suppliers to payoff goods or services purchased from companies or individuals.

Accounts Receivable - A record of what a company is owed, money anticipated to come in from goods or services sold to other companies or individuals.

Assets - Assets are the resources a business or organization owns. Assets are further broken down into the following categories: Fixed Assets (equipment, buildings etc.), Current Assets (cash), and Non-current Assets (that which does not fit in the above categories).

Audit - The process of reviewing and checking all financial book entries to insure they  correspond with the original paperwork.

Balance Sheet - A business accounts summary. This sheet is prepared at the end of each financial year or fiscal period.

Capital - Capital consists of any amount of money put into supporting a business, such as a loan. This does not include money earned by the business.

Cash Flow - This report illustrates all money coming in and going out of a business over a designated period of time.

Certified Public Accountant (CPA) - This is an accountant who has received a credential from a state or government jurisdiction. In order to achieve CPA status, one must meet a combination of requirements including: education, experience, ethical requirements, and the passing of the Uniform CPA Examination.

Debit - The record entry displayed in a financial journal of the money owed.

Depreciation - Depreciation is the amount or percentage in which an assets’ value decreases. This is commonly calculated and recorded at the end of each accounting period.

Equity - Equity is the overall value of the business to the owner. This does not include business’s assets and liabilities.

Expenses - Purchased goods and services for a business. This does not include goods used as capital or goods purchased for re-sale purposes.

Financial Accountancy (Financial Accounting) - This is the field centered around the preparation of financial statements. The financial statements are essentially used by management to make informed decision making for the business.

Financial Statements - A record of all financial transactions made by a business. This record provides vital information on the entity’s monetary resources and obligations. It consist of four statements used to retain a complete evaluation of a businesses: balance sheet, income statement, statement of cash flow, statement of retained earnings.

Fiscal Year - The accounting year for a business. This period of time must consist of a full year but may start during any given month based upon the businesses date of establishment.

Fixed Assets - Anything owned or bought by a business for use within the business alone, as long as the items retain value by the year end. Fixed assets include items such as land, buildings, and equipment.

Gross Profit - The credit balance of a trading account, the difference between the revenue and the expenses of a company or individual.

Intangible Assets - All assets which are non-physical or are not considered of a financial nature. Intangible assets include items such as loans and endowment policies.

Internal Auditing - The activity and profession of advising an organization. An internal audit is used to analyze business processes and problems to ultimately advocate effective solutions to better the organization or business as a whole.

Liabilities - All monies owed by the business to suppliers, bank overdrafts, and loans taken out for the business. Records of all liabilities are kept on the businesses balance sheet.

Management Accounting - All accounting information used by management in order to formulate informed business decisions for a company.

Matching principle - This is the method of analyzing sales and expenses, to determine the precise profit from particular sales made during a certain period or for a particular time.

Maturity Value - The value of an intangible asset estimated on the specific date it is due.

Net Loss = (Expenses – Sales) Assuming expenses are greater

Net Profit = (Sales – Expenses) Assuming sales are greater

Retained Earnings - The amount of money a business holds after the profits shares are distributed out.

Tangible Assets - All physical assets. This included buildings, vehicles, equipment, fixtures, etc.

Total Cost of Ownership (TCO) - The amount an asset will eventually cost, including extra cost attached to the original item.

Transaction - The exchange of goods or services for money, physical or entries on a financial statement. Entries of two or more into a journal meant to echo a previous document.