Accounting Terms Definitions Pdf
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In a financial accounting class, and on the job as an accountant, you need to know some jargon. Following is a glossary of words and phrases crucial to the accounting profession.
Users of financial accounting information: The people or businesses that need to see the accounting transactions organized into financial statements to make educated decisions (such as whether to invest in or loan money to a company).
Characteristics of financial information: Financial accounting information has to be
Relevant: The information directly relates to the facts you’re trying to evaluate or understand.
Reliable: You can depend on the information to steer you in the right direction.
Comparable: The quality of the information is such that users can identity differences and similarities between companies they are evaluating.
Consistent: The company uses the same accounting treatment for the same types of accounting transactions.
Generally accepted accounting principles (GAAP): The rules financial accountants have to follow when handling accounting transactions and preparing financial statements. Financial accountants can’t just throw numbers on the income statement, balance sheet, or statement of cash flows; a level playing field must exist between businesses so that the individuals reading the financial statements can compare one company to another.
Just about everything you learn and do in a financial accounting class harkens back to the way GAAP tell accountants how to do their job. For example, GAAP determine how to expense assets, record revenue, and value inventory. The Financial Accounting Standards Board (FASB) is the private-sector body that establishes GAAP for all non-governmental entities.
American Institute of Certified Public Accountants (AICPA): The national professional organization for all certified public accountants (CPAs).
Certified Public Accountant (CPA): The professional license foraccountants. To become a CPA, you must first complete a certain number of accounting and business-related courses in college. You then must take and pass the Uniform Certified Public Accountant exam, which is written and scored by the AICPA.
Chart of accounts: A list of all accounts set up to handle a company’s accounting transactions. The accounts are numbered in order, usually starting with 1000 (assets) and continuing through to 9000 (miscellaneous gains and losses).
General ledger: The record of all financial transactions taking place within a business during a particular accounting cycle, ordered by chart of account number.
Depreciation: The method used to systematically move the cost of an asset from the balance sheet to the income statement over the course of the asset’s useful life. Financial accounting uses three methods of depreciation based on time: the straight-line, declining balance, and sum-of-the-years’-digits methods. A fourth method, units-of-production, is based on actual physical usage of the fixed asset.
Stockholders’ equity: The claim that shareholders of the corporation have to the company’s net assets. Stockholders’ equity has three common components:
Paid-in capital: Money the shareholders in the corporation invest in the business
Treasury stock:A company’s own stock, which it buys back from other investors
Retained earnings: The company’s total net income or loss from the first day it’s in business to the date on the balance sheet
Contingency: A liability that exists because of a circumstance (such as a lawsuit) that may cause a business loss in the future depending on other events that have yet to happen (such as the outcome of a trial) and indeed may never happen.
Business combination: The process of combining two or more businesses — also known as mergers and acquisitions (M&A). Business combinations come in two different forms:
Asset acquisition: One company acquires the net assets of another company.
Download tamil keyboard for windows 10. Stock acquisition: The acquiring company purchases an investment in another company (which is now a subsidiary).
As an information system, accounting links an information source or transmitter (generally the accountant), a channel of communication (generally the financial statements) and a set of receivers (external users). 1.7 OBJECTIVES OF ACCOUNTING. The following are the main objectives of accounting: 1. General Accounting Terms and Definitions Accounting Cycle - Composed of several Accounting Periods spanning over twelve consecutive months. Corporations currently operate on a fiscal year beginning on July 1st and ending June 30th. Accounting Period - Expenditure and revenue measurement within a pre-determined time frame.There.
Accounting Terms Acronyms
Accounting equation Assets = Liabilities + Stockholders’ (Owner’s) Equity. Classified balance sheet groups assets into the following classification: current assets, investments, property, plant and equipment, and other assets. Liabilities are classified as either current or long-term. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com.
Basic Accounting Terms Meaning Pdf
Basic Accounting Terms are very important for Accounting’s beginner to understand it. Before starts learning to account one must read and learn all the terms to understand accounting well. Basic Accounting terminologies include all those important terms which are frequently used while studying financial accounting. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com.