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176 terms

Arkansas Accounting II Terms

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Accountant
a person who handles a broad range of jobs related to the making of choices and decisions about the design for a business accounting system and the preparation and explanation of financial reports
Accounting
planning, recording, analyzing, and interpreting financial activities
Accounting clerk
entry-level job that can vary with the size of the company from specialization in one part of the system to a wide range of recordkeeping tasks
Accounting equation
an equation showing the relationship among assets, liabilities, and owner's equity
Accounts payable
the amount of money owed, or payable, to the creditors of a business
Accounts receivable
the total amount of money owed to a business
Accounts receivable turnover ratio
the number of times the average amount of accounts receivable is collected during a specified period
Accrued expenses
expenses incurred in one fiscal period but not paid until a later fiscal period
Accrued revenue
revenue earned in one fiscal period but not received until a later fiscal period
Accumulated earnings
the employee's year-to-date gross earnings or the employee's gross earnings from the beginning of the year through the end of each pay period
Adjusting entry
journal entries recorded to update general ledger accounts at the end of a fiscal period
Adjustments
an amount that is added to or subtracted from an account balance to bring the balance up to date
Aging accounts receivable
analyzing accounts receivable according to when they are due
Allowance
reduces the amount of income tax to be withheld
Assessed value
the value of an asset determined by tax authorities for the purpose of calculating taxes
Asset
anything of value that is owned
Average number of days' sales in merchandise inventory
the period of time needed to sell an average amount of merchandise inventory
Balance sheet
a financial statement that reports assets, liabilities, and owner's equity on a specific date
Beginning inventory
the merchandise a business has on hand at the beginning of a fiscal period
Book value of a plant asset
the original cost of a plant asset minus accumulated depreciation
Book value of accounts receivable
the difference between the balance of accounts receivable and its contra account, allowance for uncollectible accounts
Bookkeeper
a person who keeps regular, concise, accurate records of business transactions by entering them in account books
Capital
the account used to summarize the owner's equity in a business
Cash payments journal
a special journal used to record only cash payment transactions
Cash receipts journal
a special journal used to record only cash receipt transactions
Chart of accounts
a list of accounts used by a business
Check
a business form ordering a bank to pay cash from a bank account
Chronological
arranged in or according to the order of time
Closing entry
journal entries used to prepare temporary accounts for a new fiscal period
Commission
an amount paid to an employee based on a percentage of the employee's sales
Consignee
the person or business who receives goods on consignment
Consignment
goods that are given to a business to sell but for which title to the goods remains with the vendor
Consignor
the person or business who gives goods on consignment
Contra account
an account whose balance decreases another account's balance
Corporation
an organization with the legal rights of a person and which may be owned by many people
Cost of merchandise
the price a business pays for goods it purchases to sell
Declining-balance method of depreciation
multiplying the book value at the end of each fiscal period by a constant depreciation rate (based on the straight-line rate—usually twice the straight-line rate; an asset with an estimated useful life of 5 years would have a depreciation rate of 40%)
Deduction
an amount that is subtracted from an employee's gross earnings
Depletion
the decrease in the value of a plant asset because of the removal of a natural resource (gas, oil, coal, trees, gravel, minerals)
Depreciation
a systematic procedure for allocating the cost of a plant asset to the accounting periods in which the firm receives service from that asset
Direct deposit
the depositing of an employee's net pay directly into his/her personal bank account; usually made through electronic funds transfer
Direct write-off method of recording losses from uncollectible accounts
recording uncollectible accounts expenses only when an amount is actually known to be uncollectible
Dishonored note
a note that is not paid when due
Double-entry accounting
the recording of debit and credit parts of a transaction
Drawing
an account showing the total assets taken out of the business by the owner
Employee earnings record
a business form used to record details affecting payments made to an employee
Ending inventory
the merchandise a business has on hand at the end of a fiscal period
Entry-level jobs
the first jobs that individuals get
Equity
financial rights to the assets of a business
Ethical
conforming to accepted and established professional standards of conduct
Expense
a decrease in owner's equity resulting from the operations of a business
Fair market value
the estimated price at which an asset or service would pass from a willing seller to a willing buyer
Financial statement
a report prepared to summarize the changes resulting from business transactions that occur during an accounting period
First-in, first-out inventory costing method
using the price of merchandise purchased first to calculate the cost of merchandise sold first
Fiscal period
the length of time for which a business summarizes and reports financial information
General journal
a journal with two amount columns in which all kinds of entries can be recorded
General ledger
a ledger that contains all accounts needed to prepare financial statements
General office clerk
may be in charge of a small cash fund, file accounting records, type accounting reports
Gross earnings
the total pay due for a pay period before deductions
Gross profit on sales
the revenue remaining after cost of merchandise sold has been deducted
Historical costs
all costs incurred by a business to operate, maintain, repair, replace, or construct
Income
a gain measured in money that derives from capital or labor; also the amount of such gain received by an individual in a given period of time
Income statement
a financial statement showing the revenue and expenses for a fiscal period
Interest
an amount paid for the use of money for a period of time
Interest expense
the interest accrued on money borrowed
Interest rate of a note
the percentage of the principal that is paid for use of the money
Inventory
the amount of goods on hand
Inventory record
a form used during a periodic inventory to record information about each item of merchandise on hand
Journalizing
recording transactions in a journal
Last-in, first-out inventory costing method
using the price of merchandise purchased last to calculate the cost of merchandise sold first
Liability
an amount owed by a business
Lower of cost or market inventory costing method
using the lower of cost or market price to calculate the cost of ending merchandise inventory
Maturity date of a note
the date a note is due
Maturity value
the amount that is due on the maturity date of a note
Memorandum
a form on which a brief message is written describing a transaction
Merchandise
goods that a merchandising business purchases to sell
Merchandise inventory turnover ratio
the number of times the average amount of merchandise inventory is sold during a specific period of time
Net 30
a form of trade credit which specifies payment is expected to be received in full 30 days after the goods are delivered [2/10, n/30—a 2% discount may be taken if the bill can be paid within 10 days; if you don't take the discount, the full amount (the "net" amount) is due within 30 days]
Net income
the difference between total revenue and total expenses when total revenue is greater
Net loss
the difference between total revenue and total expenses when total expenses are greater
Net pay
the total earnings paid to an employee after payroll taxes and other deductions
Net purchases
total purchases less purchases discount and purchases returns and allowances
Net sales
total sales less sales discount and sales returns and allowances
Notes payable
promissory notes that a business issues to creditors
Notes receivable
promissory notes that a business accepts from customers
Operating expenses
the cash spent or assets consumed to earn revenue for a business; operating expenses do not include federal income tax
Operating income
the taxable income of a corporation
Overtime rate
employers are required to pay overtime when employees covered by these laws work more than 40 hours per week; the most common rate is 1.5 times the regular pay rate
Partnership
a business in which two or more people combine their assets and skills
Pay period
the period covered by a salary payment
Payroll
the total amount earned by all employees for a pay period
Payroll register
a business form used to record payroll information
Personal property
all property not classified as real property
Petty cash
an amount of cash kept on hand and used for making small payments
Plant asset record
an accounting form on which a business records information about each plant asset
Post-closing trial balance
a trial balance prepared after the closing entries are posted
Posting
transferring information from a journal entry to a ledger account
Prepaid expenses
expenses paid in one fiscal period but not reported as expenses until a later fiscal period
Principal of a note
the original amount of a note
Production-unit method of depreciation
calculating estimated annual depreciation expenses based on the amount of production expected from a plant asset (example: depreciation on a company vehicle based on number of miles driven per year)
Promissory note
a written and signed promise to pay a sum of money at a specified time
Proprietorship
a business owned by one person
Proving
determining that amounts are in agreement or in balance
Proving cash
determining that the amount of cash agrees with the accounting records
Public accounting firm
a business selling accounting services to the general public
Purchase
to gain possession by paying money or the equivalent
Purchase order
a completed form authorizing a seller to deliver goods with payment to be made later
Purchases journal
a special journal used to record only purchases of merchandise on account
Real property
land and anything attached to the land
Receipt
a business form giving written acknowledgment for cash received
Reconciling
verifying that information on a bank statement and a checkbook are in agreement
Retail method of estimating inventory
estimating inventory by using a percentage based on both cost and retail prices
Revenue
an increase in owner's equity resulting from the operation of a business
Reversing entry
an entry made at the beginning of one fiscal period to reverse an adjusting entry made in the previous fiscal period
Salary
the money paid for employee services
Sales journal
a special journal used to record only sales of merchandise on account
Shrinkage
the amount or percentage of profit lost to shoplifting, employee theft, and paperwork error
Source document
a business paper from which information is obtained for a journal entry
Special amount column
a journal amount column headed with an account title
Spoilage
material or the amount of material that is spoiled or wasted
Statement of retained earnings
a statement that reports the changes that have taken place in the retained earnings account during the fiscal period; prepared as a supporting document for the balance sheet
Stock ledger
a file of stock records for all merchandise on hand
Stock record
a form used to show the kind of merchandise, quantity received, quantity sold, and balance on hand
Straight-line method of depreciation
charging an equal amount of depreciation expense for a plant asset in each year of useful life
Subsidiary ledger
a ledger that is summarized in a single general ledger account
Sum-of-the-years' digits method of depreciation
using fractions based on years of a plant asset's useful life
Transaction
a business activity that changes assets, liabilities, or owner's equity
Trial balance
a proof of the equality of debits and credits in a general ledger
Uncollectible accounts
accounts receivable that cannot be collected
Unearned revenue
revenue received in one fiscal period but not earned until the next fiscal period
Vendor
a business from which merchandise is purchased or supplies or other assets are bought
Wages
an amount of money paid to an employee at a specified rate per hour worked
Weighted-average inventory costing method
using the average cost of beginning inventory plus merchandise purchased during a fiscal period to calculate the cost of merchandise sold
Withdrawal
assets taken out of a business for the owner's personal use
Work sheet
a columnar accounting form used to summarize the general ledger information needed to prepare financial statements
Writing off an account
canceling the balance of a customer account because the customer does not pay
Additional paid-in-capital
capital received from investors in exchange for stock
Amortization
to write off a portion of a bond discount or premium over the life of the bond issue
Articles of incorporation
an application to organize a business as a corporation made to appropriate state officials
Board of directors
a group of individuals, elected by stockholders, who govern and are responsible for the affairs of the corporation
Bond
a long-term liability in which the corporation promises to repay a certain amount at a specified date and to pay interest at set time
Bond issue
the total amount of bonds issued at the same time
Bond sinking fund
a special fund used to pay off a bond issue when it comes due
Charter
the approved articles of incorporation
Common stock
a title given to stock when only one class is issued by the corporation
Corporation
an artificial legal entity that has rights and responsibilities of its own
Date of declaration
date on which a board of directors authorizes a dividend
Date of payment
date on which a dividend is actually paid
Date of record
one to two weeks after date of declaration; stockholders owning stock on this date will receive a declared dividend
Declaring a dividend
action by a board of directors to distribute corporate earnings to stockholders
Discount on capital stock
the amount by which the face value of a bond exceeds the issue price of the bond
Earnings per share
a measure of the amount of profit that could be assigned to each share of common stock; calculated by dividing net income by the number of outstanding shares of common stock
Equity per share
the amount that would be paid on each share of stock if the corporation liquidated and the assets were sold for their book value; calculated by dividing the total stockholders' equity by the number of shares of common stock outstanding
Intangible assets
long-lived assets that have no physical substance
Market value
the current price that is being charged for an item in the marketplace
Merchandise available for sale
purchases that a business makes with the intention of reselling; also known as inventory
Earnings per share
a measure of the amount of profit that could be assigned to each share of common stock; calculated by dividing net income by the number of outstanding shares of common stock
Equity per share
the amount that would be paid on each share of stock if the corporation liquidated and the assets were sold for their book value; calculated by dividing the total stockholders' equity by the number of shares of common stock outstanding
No-par-value stock
stock that does not have a value printed on the stock certificate
Organization costs
cost directly related to establishing a corporation
Par value
a value assigned to a share of stock and printed on the stock certificate
Par-value stock
stock that has a specific value printed on the stock certificate
Preferred stock
stock that has preferences over common stock, usually in relation to dividends
Price-earnings ratio
a measure used to determine whether the market price of a corporation's stock is reasonable; calculated by dividing the market price per share by the earnings per share
Rate earned on average stockholders' equity
the relationship between net income and average stockholders' equity
Rate earned on average total assets
the relationship between net income and average total assets
Retained earnings
the accumulated profits of a company
Retiring a bond issue
paying the amounts owed to bondholders of a bond issue
Serial bonds
a bond issue that has a series of maturity dates
Stated-value stock
the value assigned to a share of no-par stock by the board of directors
Statement of cash flow
a financial statement that shows a company's incoming and outgoing money during a time period (often monthly or quarterly)
Stock certificate
a document showing how many shares of corporation stock are owned
Subscribing for capital stock
the process of selling stock to investors on an installment basis
Term bonds
a bond issue in which all bonds have the same term or maturity date
Treasury stock
stock that has been issued by a corporation and then reacquired and held
Trustee
a bank appointed to ensure that a corporation fulfills all its responsibilities to bondholders