Glossary

an all-in-one spreadsheet showing the transition of account information from the trial balance through the financial statements

account balance that is opposite of the expected normal balance of that account

record showing increases and decreases to assets, liabilities, and equity found in the accounting equation

process of organizing, analyzing, and communicating financial information that is used for decision-making

step-by-step process to record business activities and events to keep financial records up to date

concept indicating that the financial activity of an entity (corporation) must be kept separate from that of the owners

assets = liabilities + owner’s equity

breaks down company financial information into specific time spans and can cover a month, quarter, half-year, or full year

an amount owed for the value of goods or services purchased that will be paid at a later date

outstanding customer debt on a credit sale, typically receivable within a short time period

measures how many times in a period (usually a year) a company will collect cash from accounts receivable

how many times accounts receivable is collected during an operating period and converted to cash

type of adjusting entry that accumulates during a period, where an amount was previously unrecorded

records transactions related to revenue earnings as they occur, not when cash is collected

accounting system in which revenue is recorded or recognized when earned yet not necessarily received, and in which expenses are recorded when legally incurred and not necessarily when paid

expense incurred in a period but not yet recorded, and no money has been paid

revenue earned in a period but not yet recorded, and no money has been collected

accumulated depletion

contra account that records the total depreciation expense for a fixed asset over its life

requirement for employers to withhold 0.9% from employee pay for individuals who exceed an income threshold based on their filing status

(also, paid-in capital in excess of par) account for recording excess of the proceeds received from the issuance of the stock over the stock’s par value

list of all accounts in the general ledger, after adjusting entries have been posted for the accounting period

journal entries to update accounting records at the end of a period for any transactions that have not yet been recorded

contra asset account that is specifically contrary to accounts receivable; it is used to estimate bad debt when the specific customer is unknown

A contra-asset account used to indirectly decrease Accounts Receivable for "crossover" sales discounts -- sales discounts enacted in the year after the original sales transaction occurred.

estimates bad debt during a period based on certain computational approaches, and it matches this to sales

allocation of the costs of intangible assets over their useful economic lives; also, process of separating the principal and interest in loan payments over the life of a loan

portion of a company’s retained earnings designated for a particular purpose such as future expansion, special projects, or as part of a company’s risk management plan

(also, charter) define the basic structure and purpose of a corporation and the amount of capital stock that can be issued or sold

tangible or intangible resource owned or controlled by a company, individual, or other entity with the intent that it will provide economic value

process of ensuring activities are carried out as intended or designed

maximum number of shares that a corporation can issue to investors; approved by state in which company is incorporated and specified in the corporate charter

uncollectible amounts from customer accounts

financial statement that lists what the organization owns (assets), owes (liabilities), and is worth (equity) on a specific date

allowance method approach that estimates bad debt expenses based on the balance in accounts receivable, but it also considers the uncollectible time period for each account

(also, percentage of accounts receivable method) allowance method approach that estimates bad debt expenses based on the balance in accounts receivable

internal financial report that explains and documents any differences that may exist between a balance within a checking account and the company’s records

fee often charged by a bank each month for management of the bank account

type of financial instrument that a company issues directly to investors, bypassing banks or other lending institutions, with a promise to pay the investor a specified rate of interest over a specified period of time

contract that lists the features of the bond, such as the principal, the maturity date, and the interest rate

when the company that issued the bonds pays their obligation

journal is often referred to as this because it is the place the information originally enters into the system

difference between the asset’s value (cost) and accumulated depreciation; also, value at which assets or liabilities are recorded in a company’s financial statements

buy and sell issues of stock on behalf of others

reports financial data from January 1 to December 31 of a specific year

(also, redeemable bond) bond that can be repurchased or “called” by the issuer of the bond before its due date

cash and other assets owned by a company

process in which a long-term asset is recorded on the balance sheet and its allocated costs are expensed on the income statement over the asset’s economic life

(also, book value) value that assets or liabilities are recorded at in the company’s financial statements

method of accounting in which transactions are not recorded in the financial statements until there is an exchange of cash

provides a discount on the final price after purchase, if a retailer pays within a discount window, typically stated in days

corporate earnings that companies pass along to their shareholders in the form of cash payments

cash receipts and cash disbursements as a result of business activity

account numbering system that lists all the accounts a business uses in its day-to-day transactions

executive within a company with the highest ranking title who has the overall responsibility for the management of a company; reports to the board of directors

corporation officer who reports to the CEO and oversees all of the accounting and finance concerns of a company

a balance sheet that organizes assets into current and noncurrent sections and liabilities into current and noncurrent sections

returning the account to a zero balance

prepares a company for the next accounting period by clearing any outstanding balances in certain accounts that should not transfer over to the next period

private cooperation or agreement, between more than one person, primarily for a deceitful, illegal, or immoral cause or purpose

independent, private-sector group whose five sponsoring organizations periodically identify and address specific accounting issues or projects related to internal controls

corporation’s primary class of stock issued, with each share representing a partial claim to ownership or a share of the company’s business

delays reporting of both revenues and expenses until the entire contract is complete

more than one account is listed in the debit and/or credit column of a journal entry

in a loan, when interest earned also earns interest

interrelated objectives and fundamentals of accounting principles for financial reporting

concept that if there is uncertainty in a potential financial estimate, a company should err on the side of caution and report the most conservative amount

arrangement whereby goods are available to sell by one party, but owned by another party, without transfer of ownership

accounting methods applied in a like manner, across multiple periods, allow for contrast and comparison between periods

accounting methods applied in a like manner, across multiple periods, allow for contrast and comparison between periods

process of giving advice or guidance on financial and nonfinancial impact of a course of action

current situation, where the outcome is unknown or uncertain and will not be resolved until a future point in time

uncertain outcome to a current condition that could produce a future debt or negative obligation for the company

account paired with another account type that has an opposite normal balance to the paired account; indirectly reduces or increases the balance in the paired account at the end of a period

(also, stated interest rate) interest rate printed on the face of the bond that the issuer agrees to pay the bondholder throughout the term of the bond; also known as the coupon rate and face rate

business receives cash or other assets in exchange for ownership in the business (which may be in the form of common stock if the business is organized as a corporation)

when there is a deviation from standard control protocol that leads to a failure in the internal control and/or fraud prevention processes or systems

bond that can be converted into common stock at the option of the bond holder

(also, financial statement fraud) financial statements are used to conceal the actual financial condition of a company or to hide specific transactions that may be illegal

exclusive rights to reproduce and sell an artistic, literary, or musical asset

legal business structure involving one or more individuals (owners) who are legally distinct (separate) from the business

recording and tracking of costs in the manufacturing process

expense account that houses all costs associated with getting a product ready for sale (COGS or CGS) -- the cost of the items that were sold during the accounting period

everything the company owns or controls (assets) must be recorded at its value (cost) at the date of acquisition

(also, stated interest rate or face rate) interest rate printed on the certificate, used to determine the amount of interest paid to the holder of the bond

right

business that grants extended, but short-term, payment terms to other businesses

same as "short-term asset" -- asset typically used up, sold, or converted to cash in one year or less

cost to the business that is charged in the current period

same as "short-term liability" -- liability typically expected to be paid within one year or less

portion of a long-term note due during the company’s current operating period

current assets divided by current liabilities; used to determine a company’s liquidity (ability to meet short-term obligations)

practice of protecting software, hardware, and data from digital attacks

date upon which a company’s board of directors votes and decides to give a cash dividend to all the company shareholders; the date on which the dividends become a legal liability

date that cash dividends are paid to shareholders

date the list of dividend eligible shareholders is prepared; no journal entry is required

expresses the number of days it takes a company to turn inventory into sales

bond backed by the general credit worthiness of a company rather than specific assets

left

borrowing money that will be repaid on a specific date in the future in order to finance business operations

measures the portion of debt used by a company relative to the amount of stockholders’ equity, calculated by dividing total debt by total equity

failure to pay a debt as promised

prepaid expense and revenue accounts that have delayed recognition until they have been used or earned

negative or debit balance in retained earnings

money set aside and held in account for employee’s retirement with possible contribution from employers

expense associated with consuming a natural resource

deposit that was made by the business and recorded on its books but has not yet been recorded by the bank

the portion of the asset's cost that will be recorded as depreciation expense over the asset’s useful life

process of allocating the costs of a tangible asset over the asset’s economic life

approach used to determine net cash flows from operating activities, whereby accrual basis revenue and expenses are converted to cash basis collections and payments

delays recognition of bad debt until the specific customer accounts receivable is identified

contra liability account associated with a bond that has a stated rate that is lower than the market rate and is sold at a discount

periodic “reward” distributed to owner of cash or other assets (called a "dividend" if business is organized as a corporation)

periodic “reward” distributed to owner of cash or other assets (called a "dividend" if business is organized as a corporation)

portion of the net worth (equity) that is returned to owners of a corporation as a reward for their investment (see also "distribution to owner")

practice of paying dividends that are relatively equal period after period even when earnings fluctuate

portion of the net worth (equity) that is returned to owners of a corporation as a reward for their investment (see also "distribution to owner")

occurs when income is taxed to the corporation that earned the income, and then taxed again to stockholders when they receive a distribution of the corporation’s income as dividends

accelerated depreciation method that accounts for both time and usage, so it takes more expense in the first few years of the asset’s life

requires the sum of the debits to equal the sum of the credits for each transaction

capital earned by the corporation as part of business operations

works within GAAP constraints to improve stakeholders’ views of the company’s financial position

ignores GAAP rules to alter earnings significantly to improve stakeholder’s views of the company’s financial position

measurement of the portion of a corporation’s profit allocated to each outstanding share of common stock

(also, market interest rate) rate determined by supply and demand and by the credit worthiness of the borrower

method of calculating interest expense based on multiplying the carrying value of the bond by the market interest rate

show how well a company uses and manages their assets

categories or groupings used to record transactions and prepare financial statements

difference between debits and credits for an account

residual interest in the (leftover) assets of an entity that remains after deducting its liabilities

residual interest in the (leftover) assets of an entity that remains after deducting its liabilities

selling part of the business to obtain money to finance business operations

status of stock sold between the record date and payment date during which the investor is not entitled to receive dividends

breaks down the equity portion of the accounting equation into more detail to see the impact to equity from changes in contributed capital, distributions to owners, revenues, and expenses

cost associated with providing goods or services

(also, matching principle) matches expenses with associated revenues in the period in which the revenues were generated

generally works for an outside CPA firm or his or her own private practice and conducts audits and other assignments, such as reviews

(Financial Accounting Standards Board) independent, nonprofit organization that sets financial accounting and reporting standards for both public and private sector businesses in the United States that use Generally Accepted Accounting Principles (GAAP)

amount withheld from employee pay based on employee responses given on Form W-4

involuntary tax mandated by FICA that requires employers to withhold taxes from employee wages “to provide benefits for retirees, the disabled, and children”

response to a law requiring employers to pay into a federal unemployment insurance system that covers employees in case of job disruption due to factors outside of their control

measures the financial performance of an organization using standard conventions to prepare financial reports

a professional body that issues guidelines/pronouncements for the accounting profession (also known as FASB)

independent, nonprofit organization that sets financial accounting and reporting standards for both public and private sector businesses in the United States that use Generally Accepted Accounting Principles (GAAP)

using financial statements to conceal the actual financial condition of a company or to hide specific transactions that may be illegal

cash business transaction reported on the statement of cash flows that obtains or retires financing

inventory cost allocation method that assumes the earliest acquired inventory items are the first to be sold

twelve-month reporting cycle that can begin in any month, and records financial data for that twelve-month consecutive period

tangible long-term asset

transportation terms whereby the seller transfers ownership and financial responsibility at the time of delivery

transportation terms whereby the seller transfers ownership and financial responsibility at the time of shipment

has the primary purpose of earning a profit by selling goods and services

act of intentionally deceiving a person or organization or misrepresenting a relationship in order to secure some type of benefit, either financial or nonfinancial

concept explaining the reasoning behind a person’s decision to commit fraud; the three elements are perceived opportunity, rationalization, and incentive

operating cash, reduced by expected capital expenditures and by cash dividends payments

ratio of free cash flow to total assets

ratio of free cash flow to sales revenue

buyer is responsible for when receiving shipment from a seller

seller is responsible for when shipping to a buyer

business must report any business activities that could affect what is reported on the financial statements

periodic loan payments that pay back the principal and interest over time with payments of equal amounts

reduction of an asset’s value to the company, not including physical obsolescence

(Generally Accepted Accounting Principles) common set of rules, standards, and procedures that publicly traded companies must follow when composing their financial statements

increase in organizational value from activities that are “incidental or peripheral” to the primary purpose of the business

(Governmental Accounting Standards Board) source of generally accepted accounting principles (GAAP) used by state and local governments in the United States; is a private nongovernmental organization

comprehensive listing of all of a company’s accounts with their individual balances

(also known as GAAP) the concepts, standards, and rules established by the Financial Accounting Standards Board (FASB) that guide the preparation and presentation of financial statements

common set of rules, standards, and procedures that publicly traded companies must follow when composing their financial statements

absent any evidence to the contrary, assumption that a business will continue to operate in the indefinite future

total of all inventory (beginning inventory plus purchased inventory); will either be sold this period or held in period-end inventory

time in which the merchandise is being transported from the seller to the buyer

value of certain favorable factors that a business possesses that allows it to generate a greater rate of return or profit; includes price paid for an acquired company above the fair value of its identifiable net assets

process of tracking the inflows and outflows of taxpayer funds using prescribed standards

source of generally accepted accounting principles (GAAP) used by state and local governments in the United States; is a private nongovernmental organization

provides services to the general public (taxpayers)

amount earned by the employee before any reductions in pay occur due to involuntary and voluntary deductions

amount available after deducting cost of goods sold from net sales, to cover operating expenses and profit

net profit from sale of goods; sales revenue minus cost of goods sold

proportion of margin a company attains, above their cost of goods sold to cover operating expenses and profit, calculated by subtracting cost of goods sold from total net revenue to arrive at gross profit and then taking gross profit divided by total net revenues

inventory estimation tool that uses a company’s usual gross profit percentage, related to total sales revenue, to estimate the cost of the ending inventory

original amount of the purchase without factoring in reductions for purchase discounts, returns, or allowances

original amount of the sale without factoring in reductions for sales discounts, returns, or allowances

(also known as trend analysis) looks at trends over time on various financial statement line items.

(International Financial Reporting Standards) the body of concepts and standards established by the International Accounting Standards Board that guide the preparation of financial reports

account that is only debited when the account is established or the total ending balance is increased

gross margin less deductions for operating expenses

financial statement that measures the organization’s financial performance for a given period of time

allowance method approach that estimates bad debt expenses based on the assumption that at the end of the period, a certain percentage of sales during the period will not be collected

intermediary between revenues and expenses, and the Retained Earnings account, storing all the closing information for revenues and expenses, resulting in a “summary” of income or loss for the period

process of constituting a company into a legal entity

approach used to determine net cash flows from operating activities, starting with net income and adjusting for items that impact new income but do not require outlay of cash

when a company issues shares of its stock to the public for the first time

when a company issues shares of its stock to the public for the first time

periodic installment payments from buyers

asset with financial value but no physical presence; examples include copyrights, patents, goodwill, and trademarks

monetary incentive to the lender, which justifies loan risk; interest is paid to the lender by the borrower

part of a loan charged to the borrower, expressed as an annual percentage of the outstanding loan amount

type of loan that only requires regular interest payments with all the principal due at maturity

any reporting period shorter than a full year (fiscal or calendar)

employee of an organization whose job is to provide an independent and objective evaluation of the company’s accounting and operational activities

sum of all internal controls and policies within an organization that protect assets and data

systems used by an organization to manage risk and diminish the occurrence of fraud, consisting of the control environment, the accounting system, and control activities

the body of concepts and standards established by the International Accounting Standards Board that guide the preparation of financial reports

value of products to be sold or items to be converted into sellable products

an asset account used to indirectly increase Merchandise Inventory for crossover Sales Returns

measures how many times during the year a company has sold and replaced inventory

computed by dividing cost of goods sold by average inventory; measures number of times inventory rotated through the sales cycle for the period

cash business transaction reported on the statement of cash flows from the acquisition or disposal of a long-term asset

short-term and long-term asset that is not used in the day-to-day operations of the business

financial professional who provides advice to companies wishing to issue new stock, then purchase the stock from the company issuing the stock and resell the securities to the public

exchange of cash or other assets in exchange for an ownership interest in the organization

same as "contributed capital" -- business receives assets from owners

the business receives cash or other assets in exchange for an ownership interest in the organization.  Also called "contributed capital".

withholding that neither the employer nor the employee have control over, and is required by law

when a company issues shares of its stock to the public for the first time

point at which the security agreement is initially established

authorized shares that have been sold to shareholders

record of all transactions, in date sequence

entering information into a journal

stock dividend distribution that is larger than 25% of the total outstanding shares just before the distribution

inventory cost allocation method that assumes the latest acquired inventory items are the first to sell

bank or other institution that has the primary purpose of lending money

probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

contingent liability must be recognized and disclosed if there is a probable liability determination before the preparation of financial statements has occurred

ability to convert assets into cash in order to meet primarily short-term cash needs or emergencies

show the ability of the company to pay short-term obligations if they came due immediately with assets that can be quickly converted to cash

applied to those living or working within a jurisdiction to cover schooling, social services, park maintenance, and law enforcement

same as "non-current asset" -- asset used ongoing in the normal course of business for more than one year that is not intended to be resold

stocks, bonds, or other types of investments held for more than one operating cycle or one year, whichever is longer

debt settled outside one year or one operating cycle, whichever is longer

same as "non-current liability"

decrease in organizational value from activities that are “incidental or peripheral” to the primary purpose of the business

conservatism-based concept that mandates inventory be reported at the lower of the value of inventory reflected in the general ledger or replacement value

process that allows decision makers to set and evaluate business goals by determining what information they need to make a particular decision and how to analyze and communicate this information

for-profit business that is designed to make a specific product or products

(also, effective interest rate) rate determined by supply and demand and by the credit worthiness of the borrower

price at which the stock of public companies trades on the stock market

(also, expense recognition principle) records expenses related to revenue generation in the period in which they are incurred

date a bond or note becomes due and payable

amount to be paid at the maturity date

company’s ability to reasonably estimate the amount of loss

currently 1.45% of employee gross income with no taxable earnings cap

goods held for sale at a given point in the period

resells finished goods produced by a manufacturer (supplier) to customers

commonly used in governmental accounting and combines accrual basis and cash basis accounting

system of using a monetary unit by which to value the transaction, such as the US dollar

assets a company owns that are consumed when used; they are typically taken out of the earth

method used to determine profitability by measuring the difference between an entity’s cash inflows and cash outflows

when revenues and gains are greater than expenses and losses

when revenues and gains are greater than expenses and losses

(also, take home pay) remaining employee earnings balance after involuntary and voluntary deductions from employee pay

when expenses and losses are greater than revenues and gains

outcome of purchase discounts, returns, and allowances deducted from gross purchases

amount of an account balance that is expected to be collected; for example, if a company has a balance of $10,000 in accounts receivable and a $300 balance in the allowance for doubtful accounts, the net realizable value is $9,700

outcome of sales discounts, returns, and allowances deducted from gross sales

stock issued with no par value assigned to it in a corporate charter

expense that reduces net income but is not associated with a cash flow; most common example is depreciation expense

same as "long-term asset" -- asset used ongoing in the normal course of business for more than one year that is not intended to be resold

same as "long-term liability" -- debt settled outside one year or one operating cycle, whichever is longer

tax-exempt organization that serves its community in a variety of areas

check written for an amount that is greater than the balance in the checking account

expected balance each account type maintains, which is the side that increases

including charities, universities, and foundations, helps ensure that donor funds are used for the intended mission of the not-for-profit entity

legal document between a borrower and a lender specifying terms of a financial arrangement; in most situations, the debt is long-term

formal legal contract between the buyer and the company, which requires a specific payment amount at a predetermined future date, usually includes interest, and is payable beyond a company’s operating cycle

value of amounts borrowed that will be paid in the future with interest

value of amounts loaned that will be received in the future with interest

computed by dividing average merchandise inventory by average daily cost of goods sold; measures number of days it would take to clear remaining inventory

expected days it will take to convert accounts receivable into cash

cash business transaction reported on the statement of cash flows that relates to ongoing day-to-day operations

amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer

daily operational costs not associated with the direct selling of products or services

costs of organizing the corporate entity that include attorney fees, promotion costs, and filing fees paid to the state

revenues and expenses not associated with daily operations, or the sale of goods and services

check that was written and deducted from the financial records of the company but has not been cashed by the recipient, so the amount has not been removed from the bank account

shares that have been issues and are currently held by shareholders

(also, equity) business owners’ share of the company

which party owns the inventory at a particular point in time, the buyer or the seller

(also, additional paid-in capital) account for recording excess of the proceeds received from the issuance of the stock over the stock’s par value

value assigned to stock in the company’s charter, typically set at a very small arbitrary amount; serves as legal capital

maturity value or face value of bonds

legal business structure consisting of an association of two or more people who contribute money, property, or services to operate as co-owners of a business

contract providing exclusive rights to produce and sell a unique product without competition for twenty years

percentage of work completed for the period divided by the total revenues from the contract

one operating cycle of a business, which could be a month, quarter, or year

system that is updated at the end of the period, to match the physical count of goods on hand

account that transfers balances to the next period, and includes balance sheet accounts, such as assets, liabilities, and stockholder’s equity

system that automatically updates and records the inventory account every time a sale or purchase of inventory occurs

amount of cash held on hand to be used to make payments for small day-to-day purchases

manual stock check of inventory to make sure what is recorded on the books matches what is actually in the warehouse and on the sales floor

reduction in the value of an asset to the company based on its physical deterioration

when the responsibility for the inventory transfers from the seller to the buyer

trial balance that is prepared after all the closing entries have been recorded

takes all transactions from the journal during a period and copies the information to a general ledger (ledger) and sorting the information by account

allows stockholders the option to maintain their ownership percentage when new shares of stock are issued by the company

type of stock that entitles the holder to unique preferences that are advantageous over common stock features

contra account associated with a bond that has a stated rate that is higher than the market rate and is sold at a premium

items paid for in advance of their use

initial borrowed amount of a loan, not including interest; also, face value or maturity value of a bond (the amount to be paid at maturity)

face value or maturity value of a bond (the amount to be paid at maturity); also, initial borrowed amount of a loan, not including interest

corrections of errors that occurred on previous periods’ financial statements

corporation usually owned by a relatively small number of investors; shares are not traded publicly, and the ownership of the stock is restricted to only those allowed by the board of directors

company whose stock is available only to employees or select individuals or groups

contingent liability is likely to occur and can be reasonably estimated

contingent liability is likely to occur but cannot be reasonably estimated

shows how much of each $1 of sales is returned as profit

measures how well a company produces returns given their operational performance

represents a personal loan agreement that is a formal contract between a lender and borrower

stock dividend distribution of assets other than cash

tangible assets (those that have a physical presence) held for more than one operating cycle or one year, whichever is longer

organization created under the Sarbanes-Oxley Act to regulate conflict, control disclosures, and set sanction guidelines for any violation of regulation

company whose stock is traded (bought and sold) on an organized stock exchange

provide an incentive for the retailer to pay early on their accounts, by issuing a reduced rate on their final purchase cost; the discount reduces the value of merchandise inventory

retailer receives a partial or full refund from the manufacturer for defective merchandise

new acquisitions of merchandise inventory during the period

bond that give the bondholder the right to decide whether to sell it back early or keep it until it matures

(also known as the acid-test ratio), is similar to the current ratio except current assets are more narrowly defined as the most liquid assets, which exclude inventory and prepaid expenses

contingent liability could occur but is not probable

outstanding amount owed from a customer

exchange of cash or other assets for an ownership interest in the organization

contingent liability is unlikely to occur

same as salvage value --price that the asset will sell for or be worth as a trade-in when the useful life is over

correction of financial statement amounts due to an accounting error in a prior period

portion of a company’s earnings that has been designated for a particular purpose due to legal or contractual obligations

for-profit business that purchases products (called inventory) and resells the products without altering them

inventory estimation tool that uses a company’s usual gross profit percentage, related to total sales revenue, to estimate the retail value of the ending inventory, which can then be reduced to an estimated cost figure

cumulative, undistributed net income or net loss for the business since its inception

measures the company’s ability to use its invested capital to generate income

measures the company’s ability to use its assets successfully to generate a profit

inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations

inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations

accounting for revenue when the company has met its obligation on a contract

principle stating that company must recognize revenue in the period in which it is earned; it is not considered earned until a product or service has been provided

issuance of new shares to existing shareholders in place of the old shares by decreasing the number of shares and increasing the par value of each share

reduction in the selling price offered to customers who pay their account within the discount period; the actual account is a contra revenue account that reduces sales

a liability account used for the revenue aspect of crossover sales returns (in place of decreasing Cash or Accounts Receivable)

contra revenue account with a normal debit balance that reduces the gross sales figure at the end of the period; the customer returns merchandise with a sales return, and keeps the merchandise with a sales allowance

same as residual value -- price that the asset will sell for or be worth as a trade-in when the useful life is over

federal law that regulates business practices; intended to protect investors by enhancing the accuracy and reliability of corporate financial statements and disclosures through governance guidelines including sanctions for criminal conduct

federal regulatory agency that regulates corporations with shares listed and traded on security exchanges through required periodic filings

organized market where previously issued stocks and bonds can be traded after they are issued

bond backed by specific assets as collateral for the bond

federal regulatory agency that regulates corporations with shares listed and traded on security exchanges through required periodic filings

federal regulatory agency that regulates corporations with shares listed and traded on security exchanges through required periodic filings

business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally

bond that will mature over a period of time and will be repaid in a series of payments

business that does not sell tangible products to customers but rather sells intangible benefits (services) to customers; can be either a for-profit or a not-for-profit organization

provides intangible services to customers, and does not have inventory

same as "current asset" -- asset typically used up, sold, or converted to cash in one year or less

same as "current liability" -- liability typically expected to be paid within one year or less

debt created and due within a company’s operating period (less than a year)

only one debit account and one credit account are listed in the debit and credit columns of a journal entry

stock dividend distribution that is less than 25% of the total outstanding shares just before the distribution

currently 6.2% of employees gross wage earnings with a maximum taxable earnings amount of $127,200 in 2017 and $128,400 in 2018

legal business structure consisting of a single individual

indicators of a company's ability to meet its long-term obligations and to stay in business in the future

traceable record of information that serves to document a transaction of the business

one-time extra distribution of corporate earnings to shareholders, usually stemming from a period of extraordinary earnings or special transaction, such as the sale of a company division

separate, often complicated legal entities that are often used to absorb risk for a corporation

inventory cost allocation method that traces actual cost of each specific item, whether sold or held in inventory; usually used for customized or differentiated products

someone affected by decisions made by a company; may include an investor, creditor, employee, manager, regulator, customer, supplier, and layperson

reduction to employee pay determined by responses given on Form W-4, or on a state withholdings certificate

response to a law requiring employers to pay into a state unemployment insurance system that covers employees in case of job disruption due to factors outside of their control

(also, contract interest rate) interest rate printed on the face of the bond that the issuer agrees to pay the bondholder throughout the term of the bond; also known as the coupon rate and face rate

is an amount a board of director’s assigns to each share of a company’s stock; functions as the legal capital

financial statement listing the cash inflows and cash outflows for the business for a period of time

financial statement for a sole proprietorship showing how the equity of the organization changed for a period of time

financial statement for a corporation showing how the equity of the organization changed for a period of time as a result of revenues, expenses, and dividends (distributions to owners)

provides the changes between the beginning and ending balances of each of the stockholders’ equity accounts during the period

amount at which stock is issued below the par value of stock

dividend payment consisting of additional shares rather than cash

issuance of new shares to existing shareholders in place of the old shares by increasing the number of shares and reducing the par value of each share

buying and selling of shares by investors and brokers

owner of stock, or shares, in a business

(also called equity) owner (stockholders‛) investments in the business and net earnings

method of calculating interest expense that allocates the same amount of premium or discount amortization for each of the bond’s payment periods

depreciation method that evenly splits the depreciable amount across the useful life of the asset

graphic representation of a general ledger account in which each account is visually split into left and right sides

asset that has physical substance

establishes the tax effects of transactions in determining the tax liability of an organization

liability created when a company collects taxes on behalf of employees and customers

account that is closed at the end of each accounting period, and includes income statement, dividends, and income summary accounts

bond that will be repaid all at once, rather than in a series of payments

companies can present useful information in shorter time periods such as years, quarters, or months

measures the company’s ability to pay interest expense on long-term debt incurred

measures the ability of a company to use their assets to generate revenues

reduction to the advertised manufacturer’s price during negotiation of a final purchase price

exclusive right to a name, term, or symbol a company uses to identify itself or its products

business activity or event that has an effect on financial information presented on financial statements

company’s own shares that it has repurchased from investors

list of all accounts in the general ledger

list of all accounts in the general ledger, before the adjusting entries have been posted for the accounting period

business receives cash before providing services or goods; the transaction is a liability until the service or goods are provided

depreciation method that considers the actual usage of the asset to determine the depreciation expense

time period over which an asset cost is allocated

stipend provided by the employer to employees when they take time off for vacation

shows a comparison of a line item within a financial statement to another line item within that same statement

not required to be removed from employee pay unless the employee designates reduction of this amount

inventory cost allocation method that calculates the average value inventory items by weighting each purchase lot’s goods available for sale, before dividing by the total number of units of that item

current assets less current liabilities; sometimes used as a measure of liquidity