An accounting device used in recording and summarizing the increases
and decreases in a revenue, an expense, asset, liability or owner's
An identifying number assigned to an account.
The art of recording, classifying, reporting, and interpreting the
financial data of an organization.
The time interval over which the transactions of a business are
recorded and at the end of which its financial statements are prepared.
A debt owed to a creditor for goods or services sold on credit.
Unpaid balances due on debts. (Liability)
An amount receivable from a debtor for goods or services sold on
credit. Amount due from customers. (Asset)
Are things of value owned by an individual or business. Personal
assets may include cash on hand, as well as savings and checking
accounts, an automobile, and a home. Business assets may include
similar items, as well as amounts due from customers - Accounts
Receivable - and a building owned, not rented.
Examples of assets of a small business:
cash on hand and in checking
You should remember ...
All assets are subject to two claims -- those to whom debts are
owed, and those of the owners.
In listing claims against assets, claims of those to whom debts
are owed always come before claims of the owners
A financial report showing the assets, liabilities, and owner equity
of a business on a specific date.
An analysis explaining the difference between a business'
book balance of cash and its bank statement balance.
The financial condition in which the individual or business in unable
to pay its debts and the assets have been taken over by a court-appointed
trustee for the protection of the creditors.
The carrying amount for an item in the accounting records. When
applied to a plant asset, it is the cost of the asset minus its
The sales level at which a company neither earns a profit nor incurs
A formal statement of future plans, usually expressed in monetary
The process of planning future business actions and expressing those
plans in a formal manner.
A year that begins on January 1 and ends on December 31.
An account used to record the more permanent changes in the equity
of an owner in his business.
Planning plant asset investment; involves the preparation of cost
and revenue estimates for all proposed projects, an examination
of the merits of each, and a choice of those worthy of investment.
An expenditure that increases net assets.
Cash Flow Statement
A financial statement that accounts for the increase or decrease
in a company's cash during a period by showing where the company
obtained cash and the uses it made of cash.
Cash Over and Short Account
An account in which are recorded cash overages and cash shortages
arising from making change.
Cost of Goods Sold
The beginning inventory plus net purchases less the ending inventory.
The right-hand side of a T account.
A person or business to whom a debt is owed.
The left-hand side of a T account.
A person or business that owes a debt.
The expiration of a plant asset's "quantity of usefulness."
The expense resulting from the expiration of a plant asset's
"quantity of usefulness."
A payment of cash.
Double Entry Bookkeeping
A method of bookkeeping in which, for every transaction, the amounts
debited must equal the amounts credited (debits = credits).
One who writes a check and signs it.
The payee's signature on back of a check.
An abbreviation meaning end of month.
Payments made in connection with earning income or operating one's
Federal Depository Bank
A bank authorized to receive as deposits amounts of money payable
to federal government.
Federal Unemployment Tax
A tax levied by the federal government and used to pay a portion
of the costs of the joint federal-state unemployment programs.
Federal Insurance Contribution Act taxes, otherwise known as social
A period of any 12 consecutive months used as an accounting period.
A cost that remains unchanged in total amount over a period of time.
The abbreviation for "free on board," which is used
to denote that goods purchased are placed on board the means of
transportation at a specified geographic point free of any loading
and transportation charges at that point.
Transportation charges on merchandise purchased for resale.
All income from whatever source derived.
The amount of an employee's pay before any deduction.
The difference between net income from sales and the cost of goods
A financial statement showing revenues earned by a business, the
expenses incurred in earning the revenues, and the resulting net
income or net loss. Frequently referred to as a Profit and Loss
A document listing items sold, together with prices, the customer's
name, and terms of sale.
Are the debts owed by an individual or business. Personal liabilities
may include unpaid charge account balances, as well as amounts owed
on a home and/or automobile loan. Business liabilities may include
similar items: amounts owed, or accounts payable.
Examples of liabilities of a small business:
The winding up of a business by converting its assets to cash and
distributing the cash to the proper parties.
Long Term Investments
Investment, not intended as a ready source of cash in case of need.
A reduction in the marked selling price of an item.
The unsold merchandise on hand at a given time.
The number of times a company's average inventory is sold
during an accounting period, calculated by dividing cost of goods
sold by average merchandise inventory.
A debt, usually long term, that is secured by a special claim against
one or more assets of the debtor.
The excess of revenues over expenses.
You should remember ...
When revenue is greater than expenses there is net income.
When expenses are greater than revenue there is a net loss.
Owner's equity is increased by:
- additional investments and
- net income
Owner's equity is decreased by:
- withdrawals by the owner and
- net loss
The excess of expenses over revenues.
Gross pay minus deductions.
Out of Pocket Cost
A cost requiring a current outlay of funds.
The net worth or capital of an individual or business. It is the
amount of assets remaining after all liabilities are paid. To determine
a business owner's equity, total all assets, then deduct all
liabilities. The difference is the owner's equity (A - L =
OE). Owner's equity is frequently referred to as Net Worth,
Capital or Proprietorship.
The party to whom payment is made by check.
A separate cash fund used for small disbursements for which checks
might be inappropriate.
An asset that will be consumed in the operation of a business, and
as it is consumed it will become an expense.
The estimated worth today of an amount of money to be received at
a future date.
A unit of a business that incurs costs and generates revenues.
To bring the petty cash fund up to the amount at which it was originally
Money or money equivalent in exchange for goods and services sold.
Discounts given on sales of merchandise
State Unemployment Tax
A tax levied by a state, the proceeds from which are used to pay
benefits to unemployed workers.
A depreciation method that allocates an equal share of the total
estimated amount a plant asset will be depreciated during its life
to each accounting period in that life.
A cost that changes in total amount over a period of time.
The individual or enterprise selling something.
A special form used to show how much and to whom petty cash has
been paid, as well as the date and the signature of the party receiving