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College Resource Center : Computerized Accounting : Peachtree® 2003 : Glossary

Glossary
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accelerated cost recovery system (ACRS) A depreciation method used for federal income tax purposes that is applied to assets placed in service between 1981 and 1986.
accelerated method A method in which more depreciation is taken in the early years of an asset's useful life and less in the later years.
accounting The process of recording, summarizing, analyzing, and interpreting financial activities.
accounting period The period of time covered by a firm's financial statements.
accounts payable The amounts that a business owes to its creditors for goods or services purchased on credit.
accounts payable ledger A subsidiary ledger that contains accounts for vendors.
accounts receivable The amounts owed to a business by its customers for goods or services sold on credit.
accounts receivable ledger A subsidiary ledger that contains accounts for credit customers.
accrual basis An accounting method in which a firm recognizes revenue when it is earned and recognizes expenses when they are incurred.
adjusting entries Entries that are used to bring the general ledger accounts up to date so that they include previously unrecorded items that relate to the period.
allowance method A method in which the expense from uncollectible accounts is estimated at the end of each accounting period and recorded by means of an adjusting entry.
authorized stock The maximum number of shares of stock permitted by the corporate charter.
average cost method Inventory costing method in which the value of the ending inventory is based on a single cost (the average cost) assigned to all units available for sale.
balance sheet A report of a firm's assets, liabilities, and owner's equity as of a specific date.
bank reconciliation Bringing the ending balances of the bank statement and the firm's own cash records into agreement.
bank statement A listing of all transactions that occurred in a checking account during a month and the beginning and ending balances.
board of directors Individuals elected by stockholders to establish policies for a corporation and hire managers.
book value The difference between the cost of a fixed asset and its accumulated depreciation.
bylaws A set of rules by which a corporation will operate.
cash The funds that a business has on hand and on deposit in banks.
cash basis An accounting method in which a firm recognizes revenue when cash is received and recognizes expenses when cash is paid.
charter A legal document issued by a state that permits a corporation to operate.
chart of accounts A listing of all the accounts used by a business.
closely held corporation A corporation owned by just a few stockholders.
common stock Stock that provides the right to vote and to receive dividends if the board of directors declares them.
compound entry A journal entry that involves more than two accounts.
continuous life A corporation can exist forever. Its life is not affected by changes in ownership.
controlling account A general ledger account that summarizes the balances of all the accounts in a subsidiary ledger.
corporation A business owned by stockholders or shareholders.
credit memo A form issued to a customer to show the credit granted for a return of goods.
current assets Cash, assets that will be turned into cash within one year, and assets that will be used up within one year.
current liabilities Debts due for payment within one year.
depreciation The process of allocating the cost of a fixed asset to operations during its estimated useful life.
direct write-off method A method in which the expense from uncollectible accounts is recorded when the accounts actually become bad debts.
dividend A distribution of part of a corporation's earnings to stockholders.
double declining-balance A method that allocates depreciation at twice the straight-line rate.
method
double-entry accounting A method of accounting in which equal debits and credits are recorded for each transaction.
double taxation As a legal entity, a corporation pays income tax on its earnings. When the stockholders receive part of the earnings in the form of dividends, they also pay income tax.
earned capital Retained earnings.
estimated salvage value The amount that a business expects a fixed asset to be worth at the end of its useful life.
estimated useful life The number of years that a business expects a fixed asset to be used in its operations.
FIFO method Inventory costing method in which the value of the ending inventory is based on the assumption that the first items purchased are the first ones sold.
fiscal year An accounting period of one year.
fixed asset ledger A subsidiary ledger that contains records for individual fixed assets.
fixed assets Physical assets that will be used by a business for more than a year.
general journal A journal in which all kinds of transactions can be recorded.
general ledger The main ledger of a business.
half-year convention An approach used by ACRS and MACRS that allocates depreciation for half a year during the first year an asset is owned.
income statement A report of a firm's revenue, expenses, and net income or net loss for an accounting period.
intangible assets Long-term assets that have no physical substance.
inventory The stock of goods that a merchandising business has on hand for resale to consumers.
inventory costing methods Methods used to determine the dollar value of the ending inventory.
invoice A bill for goods or services sold to a customer.
job costing Tracking of all costs associated with a job and totaling those costs at the end of the project.
job costs The costs of the materials, labor, and other items required for completion of a job.
journal A record in which transactions are listed in order by date.
ledger A group of related accounts.
LIFO method Inventory costing method in which the value of the ending inventory is based on the assumption that the last items purchased are the first ones sold.
limited liability The stockholders of a corporation are not personally liable for the debts of the business.
limited life A partnership ends when an existing partner dies or withdraws or when a new partner is admitted.
long-term liabilities Debts that extend for more than one year.
manufacturing businesses Firms that produce products from raw materials and sell those products to wholesalers or end-users.
market value The amount that a buyer is willing to pay for stock.
merchandising businesses Firms that buy goods and resell them to consumers.
modified accelerated cost recovery system (MACRS) A depreciation method used for federal income tax purposes that is applied to assets placed in services after 1986.
mutual agency rule Rule that allows a single partner to enter into a contract that is binding on all other partners with or without their consent.
natural resources Long-term assets that are removed from the ground.
net income or net loss The difference between revenue and expenses.
net pay The amount received by employees after deductions are made from their gross pay.
outstanding stock The number of shares of stock actually issued by a corporation.
paid-in capital The amount of capital received from stockholders through their purchases of stock.
partnership A business owned by two or more people.
partnership agreement A written contract that specifies the terms of a partnership such as the division of profits and losses.
par value An arbitrary amount that some states require corporations to assign to each share of stock for legal and accounting purposes.
pay plan The method used to calculate an employee's earnings.
payroll period The time period for which earnings and deductions are calculated.
periodic inventory system A system in which a firm's inventory is counted at regular intervals.
perpetual inventory system A system in which a firm maintains a running balance for all inventory items.
posting The transfer of information about transactions to ledger accounts.
preferred stock Stock that usually does not carry the right to vote but provides a fixed dividend.
publicly held corporation A corporation whose stock can be purchased by the public.
retained earnings The accumulated profits of a corporation from past operations.
sales order A form that a business may prepare to record the details of a customer's order.
sales quotation A form that shows the prices a business will charge for specified goods.
service businesses Firms that provide services to consumers.
sole proprietorship A business owned by one person.
source documents Business papers that provide evidence of transactions.
special journal A journal that is used to record a single type of transaction.
statement of account A form that a business sends each month to show all transactions with a customer and the balance owed by the customer.
statement of cash flow A report of the inflows and outflows of cash from operating activities, investing activities, and financing activities for a period.
statement of changes in financial position A report of a firm's sources and uses of working capital for a period.
statement of retained earnings A financial statement that shows the changes in a corporation's retained earnings during an accounting period.
stockholders or shareholders The owners of a corporation.
straight-line method A method in which an equal amount of depreciation is taken each year.
subsidiary ledger A ledger that contains a single type of account.
sum-of-the-years'-digits method A method that allocates depreciation on the basis of a fraction that changes each year.
tangible assets Assets that have a physical substance.
transactions Financial events that change a firm's assets, liabilities, or owner's equity.
trial balance A proof that the general ledger is in balance.
units-of-production method A method that allocates depreciation on the basis of how much work an asset produces.
unlimited liability Personal responsibility for the debts of a business by a sole proprietor or partner.
vendors The businesses or individuals to whom accounts payable are owed.
working capital The excess of current assets over current liabilities.



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