ACCOUNTING JARGONS

1. Accounti ng  – process of identi fying, measuring, and reporti ng fi nancial

informati on by use of a double entry accounti ng system.

2. Accounts Payable  – (AP) money owed to creditors, to other businesses; the

company must pay money to vendors for the purchase services or goods.

3. Accounts Receivable  – (AR) records of any money that a company is owed

because of the sale of their goods or services.

4. Accrual Accounti ng  – a method in which income is recorded when it is earned

and expenses are recorded when they are incurred, all independent of cash
fl ow.

5. Accruals  – a list of expenses that have been incurred and expensed, but not
paid or a list of sales that have been completed, but not yet billed.

6. Amorti zati on  – gradual reducti on of amounts in an account over ti me, either

assets or liabiliti es.

7. Asset  – property or item  with a cash value that is owned by a business or

individual.

8. Audit Trial  – a record of every transacti on, when it was done, by whom and
where, used by auditors when validati ng the fi nancial statement.

9. Auditors  – third party accountants who review an enti ty’s fi nancial statements
for accuracy and provide a statement to that eff ect.

10. Balance Sheet  – summary of a company’s fi nancial status, including assets,

liabiliti es, and equity.

11. Bookkeeping  – Recording of fi nancial transacti ons both income and expenditure
in an accounti ng system.

12. Budgeti ng  – Budgeti ng involves maintaining a fi nancial plan to control cash

fl ow.

13. Capital Stock  – Total amount of common and preferred stock issued by a
company
Capital Surplus.

14. Capitalized Expense  – Accumulated expenses that are expensed over ti me.

15. Cash Flow  – the total amount of money being transferred into and out of a
business, especially as aff ecti ng liquidity.

16. Cash-Basic Accounti ng  – a method in which income and expenses are recorded
when they are paid.

17. Charts of Accounts  – a listi ng of a company’s accounts and their corresponding

numbers
Closing the Books/Year End Closing.

18. Cost Accounti ng  – Used internally to determine the cost of operati ons and to
establish a budget to increase profi tability.
 ACCOUNTING JARGONS

19. Credit  – Entered in the right column of accounts. Liability, equity and revenue
increase on the credit side.

20. Credit Note  – A form or lett er sent by a seller to a buyer, stati ng that a certain
amount has been credited to the buyer’s account. A credit note is issued in
various situati ons to correct a mistake.

21. Debit  – Entered in the left column of accounts. Assets and expenses increase on
the debit side.

22. Depreciati on  – recognizing the decrease in the value of an asset due to age and
use.

23. Dividends  – Profi ts returned to the shareholders of a corporati on.

24. Double-Entry Bookkeeping  – Requires entries of debits and credits for each
fi nancial transacti on

25. Equity  – Represents the value of company ownership.

26. Financial accounti ng  – is the fi eld of accounti ng concerned with the
preparati on of fi nancial statements for decision makers, such as stockholders,
suppliers, banks, employees, government agencies, owners, and other
stakeholders using either the Historical Cost or Constant Purchasing
Power Accounti ng model.

27. Financial Statement  – a record containing the balance sheet and the income
statement.

28. Fixed Asset  – Used for a long period of ti me, e.g. equipment or buildings,
computers.

29. General Ledger  – Where debit and credit transacti ons are recorded.

30. Goodwill  – The account for goodwill is located in the assets secti on of a

company’s balance sheet. It is an intangible asset, as opposed to physical
assets like buildings and equipment.

31. Income Statement  – a summary of income and expenses.

32. Inventory Valuati on  – A valuati on method modifi ed for use in real estate and
business appraisals

33. Inventory  – merchandise purchased for resale at a profi t

34. Invoice  – a list of goods sent or services provided, with a statement of the sum
due for these; a bill.

35. Job Costi ng  – system of tracking costs associated with a job or project (labour,
equipment, etc) and comparing with forecasted costs

36. Journal  – The fi rst place fi nancial transacti ons are entered. They are entered
chronologically.
 ACCOUNTING JARGONS

37. Liability  – In fi nancial accounti ng, a liability is defi ned as an obligati on of an

enti ty arising from past transacti ons or events, the sett lement of which may
result in the transfer or use of assets, provision of services or other yielding of
economic benefi ts in the future.

38. Liquid Asset  – An asset is said to be liquid if it is easy to sell or convert into
cash without any loss in its value. Defi niti on: An asset is said to be liquid if it is
easy to sell or convert into cash without any loss in its value. By defi niti on,
bank notes and checking accounts are the most liquid assets.

39. Loan  – money borrowed from a lender and usually repaid with interest.

40. Master Account  – A Master Account has subsidiary accounts. Accounts

Receivable could be a master account for various individual receivable
accounts.

41. Net Income  – Net Income equals revenue minus expenses, taxes, depreciati on
and interest.

42. Non-Cash Expense  – Does not require cash outlay, e.g. depreciati on,
amorti zati on.

43. Non-Operati ng Income  – Income not generated from the business. An example
might be the sale of unused equipment.

44. Operati ng Income  –  is a measure of profi tability that tells investors how much
revenue will eventually become profi t for a company. Operati ng income is also
called Earnings Before Interest and Taxes (EBIT). It is important to understand
what expenses are included and excluded when calculati ng operati ng income.

45. Other Income  – income generated from other than regular business operati ons,
i.e. interest, rents

46. Outstanding Invoice  – an invoice that has not yet been paid

47. Payroll  – a list of employees and their wages.

48. Posti ng  – Refers to the recording of ledger entries.

49. Profi t  – gross income minus expenses.

50. Profi t/Lost Statement  – A fi nancial report issued by a company on a regular basis
that discloses earnings, expenses and net profi t for a given ti me period (Income
Statement)

51. Reconciliati on  – The act of proving an account balances, debits and credits
equal.

52. Retained Earnings  – In accounti ng, retained earnings refers to the porti on of net
income of a corporati on that is retained by the corporati on rather than
distributed to shareholders as dividends.

53. Revenue  – total income before expenses, gross income.

 ACCOUNTING JARGONS

54. Shareholder Equity  – the capital and retained earnings in an enti ty att ributed to
the shareholders.

55. Single-Entry Bookkeeping  – system of accounti ng in which transacti ons are

entered into one account.

56. Statement of Accounts  – a summary of amounts owed to a vendor, lender.

57. Subsidiary Accounts  – Accounts that are under a control account; they must
equal the main account balance (Offi ce Suppliers, Cleaning Supplies)

58. Suppliers  – assets purchased to be consumed by the business, to carry out

business acti viti es

59. Trial Balance  – A trial balance is a list of all the General ledger accounts (both
revenue and capital) contained in the ledger of a business

60. Write-down/Write-off  – an accounti ng entry that reduces the value of an asset

due to an impairment of that asset; i.e. the account receivable from the
bankrupt customer

SUBMITED BY

M. GAYATHRI 5.2.2000

20MBA19