Accounting Glossary #2
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76 terms
Terms | Definitions |
|---|---|
 employee | one who is under the control and direction of an employer with regard to the performance of employment |
| endorsement | the signature of the payee or other holder placed on the back of a check or other negotiable instrument |
| endorser | a person or company whose name is written on the back of a check |
| EOM | end of month |
| expense | a decrease in assets, other than withdrawals by the owner, which result from efforts to produce revenues |
| face of note | the principle sum the maker of a note promises to pay |
| federal income tax withholding | the amount that an employer must withhold from an employee's pay for income tax purposes |
| federal insurance contribution act | a federal act which requires most employers and employees to pay taxes to support the federal social security program |
| federal unemployment tax act | a federal act imposed upon each employer for the purpose of financing the administration costs of the federal and state unemployment compensation programs |
| FICA | abbreviation for the Federal Insurance Contribution Act |
| final processing / reporting | the process of communicating the results achieved during an accounting period to others |
| fiscal period | a period of time covered by an income statement |
| fixed assets / long term assets | property of a relatively permanent nature used in the operation of a business and not intended for resale |
| fixed liabilities / long term liabilities | liabilities that are not due and payable within one year |
| footing | a total, written in small pencil figures, under the last entry in a column of an account |
| FUTA | federal unemployment tax act |
| general journal | a book of original entry in which business transactions are recorded in chronological order |
| general ledger | the book of accounts |
| gross earnings | income before any deductions have been made |
| gross profit | net sales minus the cost of goods sold |
| gross profit percentage | gross profit divided by net sales |
| in balance | a condition in which the total of the debits and the total of the credits are equal in an account |
| income / revenue | an inflow of assets as a result of selling a product or providing a service |
| income statement | a formal financial statement which presents the income, expenses, and resulting net profit or net loss for a given period |
| income tax | a tax levied on the earnings of individuals and businesses by federal, state, and local governments |
| independent contractor | any person who agrees to perform a service for a fee and who is not subject to the control of those for whom the service is performed |
| intangible assets | those assets that cannot be touched or grasped (examples include patents, copyrights and goodwill) |
| interest | money paid for the use of money |
| interpreting | explaining the significant events or developments that occur, usually taking the form of analysis and comparisons |
| inventory turnover | the number of times the average inventory has been sold or used up (turned over) during a period. Calculation 365/Cost of Goods Sold for Period/Average inventory. Note : Average Inventory = (Beginning Inventory + Ending Inventory) divided by 2. |
| inventory | a source document showing quantity, description, prices of items, total amount of purchase and the terms of payment |
| Journal | see general journal journalizing-the process of recording business transactions in a journal |
| ledger | a book of accounts. |
| liabilities | and debts that a business owes |
| liquidity analysis | measures the ability of the firm to meet its current obligations |
| maker | an individual who promises to pay on a promissory note; an individual who signs a promissory note |
| maturity date | the date on which payment is due on a promissory note |
| merchandise / inventory | goods purchased for resale at a profit |
| mortgage payable | a long-term liability; a written promise that pledges real property as security for payment of a debt |
| NSF | not sufficient funds |
| net income / net profit | the difference between gross profit and expenses when gross profit are larger |
| net loss | the difference between gross profit and expenses when expenses are larger |
| net pay / net earnings | gross pay less payroll deductions; employees take home pay |
| net purchases | purchases minus purchase returns and allowances minus purchase discounts |
| net sales | sales minus sales returns and allowances minus sales discount |
| note payable | a written promise to pay a creditor a certain amount in the future |
| note receivable | a written promise of a customer to pay the business a sum of money at a future date |
| operating expense / overhead | expenses incurred in the normal operation of a business |
| original cost basis | the amount originally paid for a depreciable asset |
| other expenses | expenses incurred that is not the direct result of regular trading activities of a business |
| other income | income received that is not the direct result of regular trading activities of a business |
| outstanding checks | checks that have been drawn and subtracted from the depositor's checkbook, but which have not yet been presented to the bank for payment |
| owner's equity | the amount by which the total assets exceed the total liabilities of a business; an owner's financial interest in a business |
| overdraft | the issuance of a check without sufficient funds in the account when it is presented for payment |
| payee | a person or company who will receive payment on a promissory note, check, draft or money order |
| petty cash fund | a fund of currency and coin established for the payment of small amounts of money |
| petty cash voucher | a form used to reflect payments from the petty cash fund |
| post closing trial balance | a work paper prepared after all temporary owner's equity accounts have been closed and all permanent accounts have been balanced and ruled, proving the equality of the debits and credits |
| postdated check | a check dated subsequent to (following) its date of issuance |
| posting | the transferal of data from the journal to the ledger |
| prepaid expenses | items that are considered to be assets when acquired, but which will become expenses when consumed or expired |
| principal | a face value of a promissory note upon which interest is computed |
| profit margin | net income divided by net sales |
| profitability analysis | provides evidence concerning the earnings potential of a company and how effectively the firm is being managed |
| promissory note | a written promise made by a person or business to pay a certain sum of money to another person or business at a specified time in the future |
| proving the journal | a process which examines each page of a journal, confirming that the debit entries equal the credit entries on each page |
| proving cash | the process of determining whether the amount of cash, both on hand and in the bank, is the same as that which is indicated in the accounting records |
| purchase invoice | a source document prepared by the seller listing the items shipped, their cost and the method of shipment (from the buyer's viewpoint) |
| purchase order | a written order by a buyer for merchandise or other property specified in the purchase requisition |
| purchase requisition | a form used to request the responsible person or department to purchase merchandise or other property |
| purchases | a temporary owner's equity account used to record the buying of merchandise for resale |
| purchases discount | a temporary owner's equity contra account used to record discounts taken on inventory purchases; the amount of any discounts granted by suppliers to encourage prompt payment of their invoices |
| purchases journal | a book of original entry used to record purchases of merchandise on credit only |
| purchases returns and allowances | a temporary owner's equity contra account utilized to record the return of merchandise to the manufacturer or supplier as the result of material defects in workmanship and/or inferior product quality |
| quarterly | a three month period |
| quick assets | cash, marketable securities, accounts and notes receivable |
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