Accounting 

An information system that identifies, records, and communicates 

Balance Sheet

A financial statement that reports the assets, liabilities, and stockholders' equity at a specific date 

Accounting Equation 

Assets = Liabilities + Stockholders' Equity 

Asset 

Resources owned by a business 

Common Stock

The total amount paid in by stockholders 

Corporation 

A business organized as a separate legal entity under state corporation law having ownership divided into transferable shares of stock 

Dividends 

A distribution by a corporation to its stockholders on an equal basis 

Expense 

The cost of assets consumed or services used in the process of earning revenue 

FASB 

Financial Accounting Standards Board

A private organization that establishes generally accepted accounting principles 

Financial Accounting 

The field of accounting that provides economic and financial information for investors, creditors, and other external users 

Net Income 

The amount by which revenues exceed expenses 

Income Statement 

A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time 

GAAP 

Generally Accepted Accounting Principles

Common standards that indicate how to report economic events 

Liability 

Creditorship claims on total assets 

Management Accounting 

The field of accounting that provides economic and financial information for managers and other internal users 

Net Loss 

The amount by which expenses exceed revenues 

Paid-In Capital 

The total amount paid in by stockholders 

Partnership 

An association of two or more persons to carry on as co-owners of a business for profit 

Proprietorship 

A business owned by one person 

Retained Earnings 

Revenues/Expenses/Dividends 

Revenues 

The gross increase in stockholders' equity resulting from business activities entered into for the purpose of earning income 

Transaction

The economic event of the enterprise that is recorded by accountants 

Statement of Retained Earnings 

A financial statement that summarizes that changes in retained earnings for a specific period of time 

Statement of Cash Flows 

A financial statement that provides information about the cash inflows and cash outflows of an entity for a specific period of time 

Stockholders' Equity 

The ownership claim on total assets of a corporation 

Account 

A record of increases and decreases in specific asset, liability, or stockholders' equity items 

Chart of Accounts 

A list of accounts and the account numbers that identify their location in the ledger 

Compound Entry 

A journal entry that involves three or more accounts 

Credit 

The right side of an account 

Debit 

The left side of an account 

Double-entry system 

A system that records in appropriate accounts the dual effect of each transaction 

General Journal 

The most basic form of journal 

General Ledger 

A ledger that contains all asset, liability, and stockholders' equity accounts 

Journal 

An accounting record in which transactions are initially recorded in chronological order 

Journalizing 

The entering of transaction data in the journal 

Ledger 

The entire group of accounts maintained by a company 

Normal Balance 

The side (credit/debit) the account is normally on 

Posting 

The procedure of transferring journal entries to the ledger accounts 

Posting Reference 

The number associated with each account on the journal/ledger 

T-Account 

The basic form of an account 

Trial Balance 

A list of accounts and their balances at a given time 

Accrual Basis Accounting 

Accounting basis in which transactions that change a company's financial statements are recorded in the periods in which the events occur 

Accrued Expense 

Expenses incurred but not yet paid in cash or recorded 

Accrued Revenue 

Revenues earned but not yet received in cash or recorded 

Accumulated Depreciation 

A contra asset that goes along with certain assets such as equipment, etc. 

Adjusted Trial Balance 

A list of accounts and their balances after all adjustments have been made 

Adjusting Entries 

Entries made at the end of an accounting period to ensure that the revenue recognition and matching principles are followed 

Book Value 

The difference between the cost of a depreciable asset and its related accumulated depreciation 

Calender Year 

An accounting period that extends from January 1 to December 31 

Cash Basis Accounting 

Accounting basis in which revenue is recorded when cash is received and an expense is recorded when cash is paid 

Contra Asset 

An account that is offset against an asset account on the balance sheet 

Depreciation

 The allocation of the cost of an asset to expense over its useful life in a rational and systematic manner

Fiscal Year 

An accounting period that is one year in length 

Interim Period 

Monthly or quarterly accounting time periods 

Prepaid Expenses 

Expenses paid in cash and recorded as assets before they are used or consumed 

Unearned Revenues 

Cash received and recorded as liabilities before revenue is earned 

Useful Life 

The length of service of a productive facility 

Classified Balance Sheet 

A balance sheet that contains a number of standard classifications or sections 

Closing The Books 

Zeroing out all temporary accounts for the start of the next fiscal year 

Closing Entries 

Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders' equity account, Retained Earnings 

Correcting Entries 

Entries to correct errors made in recording transactions 

Current Assest 

Cash and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year of the operating cycle, whichever is longer 

Current Liability 

Obligations reasonably expected to be paid from existing current assets or through the creation of other current liabilities within the next year or operating cycle, whichever is longer 

Income Summary 

A temporary account used in closing revenue and expense accounts 

Intangible Assets 

Noncurrent resources that do not have physical substance 

Liquidity 

The ability of a company to pay obligations that are expected to become due within the next year or operating cycle 

Long-term Investments 

 Resources not expected to be realized in cash within the next year or operating cycle

Operating Cycle 

The average time required to go from cash to cash in producing revenues 

Permanant (Real) Accounts 

 Balance sheet accounts whose balances are carried forward to the next accounting period

Post-closing Trial Balance 

A list of permanent accounts and their balances after closing entries have been journalized and posted 

Property, Plant, and Equipment 

Assets of a relatively permanent nature that are being used in the business and not intended for sale 

Reversing Entry 

An entry made at the beginning of the next accounting period that is the exact opposite of the adjustment entry made in the previous period 

Stockholders' Equity 

The ownership claim of shareholders on total assets as represented by common stock and retained earninigs 

Temporary (Nominal) Accounts 

Revenue, expense, and dividend accounts whose balances are transferred to retained earnings at the end of an accounting period