Account is a formal record that represents, in words, money or other unit of

measurement, certain resources, claims to such resources, transactions or other events

that result in changes to those resources and claims; a form of record that summarizes
the increases or decreases of any specific accounting value
Accounting is the systematic process of measuring and reporting relevant financial
information about the activities of an economic organization or unit
Accounting cycle is a standard sequence of uniform procedures repeated for each
accounting period
Accounting equation is assets equals liabilities plus equity. (A = L + E)
Accounting period/year is a period of 12 consecutive months chosen by an entity as
its ACCOUNTING period which may or may not be a calendar year.
Accounts Payable includes debts arising from the purchase of an asset or the
acquisition of services on account
Accounts Payable subsidiary ledger is separate ledger containing a list of all creditor
accounts arranged in alphabetical order in a separate ledger

Accounts receivable are amounts collectible from the customers to whom sales have
been made or services have been rendered on account or credit
Accounts receivable subsidiary ledger is a separate ledger containing a list of all
customer accounts arranged in alphabetical order in a separate ledger

Accrual Principle is a principle stating that income should be recognized at the time it
is earned such as when goods are delivered or when services have been rendered; and
that expense should be recognized at the time it is incurred
Accrued expenses are expenses already incurred or used, but not yet paid
Accrued income is income already earned but not yet received

Accumulated depreciation represents the expired cost of property, plant, and

equipment as a result of usage and passage of time
Adjusting journal entries are accounting entries to account for a period’s changes,
omissions or other financial data required to be reported "in the books"
Adjusted Trial Balance reflects totals after the adjusting entries are posted to the
general ledger.
Advances to employees refers to certain amount of money loaned to employees payable
in cash or through salary deductions
Allowance for bad debts/ doubtful accounts are losses due to uncollectible accounts

Assets are economic resources owned by the business expected for future gain. They
are property and rights of value owned by the business.

Accounting Manual is a document prepared to provide bookkeepers with direction and

guidance in connection with those bookkeeping requirements of entities
Balance is the Sum of DEBIT entries minus the SUM of CREDIT entries in an
ACCOUNT. If positive, the difference is called a DEBIT BALANCE; if negative, a CREDIT
BALANCE
Balance Sheet reports the financial position at a point in time (end of the quarter or
year).
Bonds payable is a certificate of indebtedness under the seal of a corporation,
specifying the terms of repayment and the rate of interest to be charged
Bookkeeping is the recording of all financial transactions undertaken by a business (or
an individual). A bookkeeper (or book-keeper), sometimes called an accounting clerk is
a person who keeps the books of an organization. The organization might be a business,
a charity or even a local sports club
Building is an edifice or structure used to accommodate the office, store, or factory of
a business enterprise in the conduct of its operations
Business is the social science of managing people to organize and maintain collective
productivity toward accomplishing particular productive goals, which is usually to
generate profit
Business documents are forms containing evidence to support a business transaction
Buyer is the one who purchases goods

Calendar year is a twelve-month period that starts on January 1 and ends on

December 31

Capital is called equity. It is an account bearing the name of the owner representing
the original and additional investment of the owner of the business increased by the
amount of net income earned during the year.

Cash includes coins, currencies, checks, bank deposits, and other cash items readily
available for use in the operations of the business

Cash discount is a deduction from the selling or purchase price granted to customers
to encourage prompt payment of accounts
Cash equivalents are short-term investments that are readily convertible to known
amounts of cash which are subject to an insignificant risk to changes in value
Cash Payments Journal is a book used to record all payments made in cash such as
for accounts payable, merchandise purchases, and operating expenses; also termed
cash disbursements journal
Cash Receipts Journal is a book used to record all collections made in cash such as
for accounts receivable, merchandise sold, and interest income.

Chart of Accounts is a systematic listing of all accounts used by an entity with their
corresponding account numbers
Classifying is the sorting of similar and related business transactions into the three
categories of assets, liabilities, and owner’s equity

Closing entries are prepared after the financial statements have been completed;
entries used to eliminate the balances of the nominal accounts and prepare them for
the next accounting period; entries used to update the owner’s capital account at the
end of the period

Compound entry is a journal entry that has two or more debit entries or two or more
credit entries
Consistency is a principle stating that approaches used in reporting must be uniformly
employed from period to period to allow comparison of results between time periods
Contra-asset accounts are accounts deducted from the related asset accounts
Cooperative is an association of small producers and consumers who come together
voluntarily to form a business which they own, manage and patronize
Corporation is a form of business organization managed by an elected board of
directors where the investors are called stockholders and the unit of ownership is called
share of stock
Cost of sales/ cost of goods sold represents the cost of merchandise inventory sold by
the business to its customers

Credit (Cr) means an entry to the right hand side of an account. Entry on the right side
of a DOUBLE-ENTRY BOOKKEEPING system that represents the reduction of an ASSET
or expense or the addition to a LIABILITY or REVENUE.

Debit (Dr) means an entry to the left hand side of an account. Entry on the left side of
a DOUBLE-ENTRY BOOKKEEPING system that represents the addition of an ASSET or
expense or the reduction to a LIABILITY or REVENUE

Debit memorandum is a written notice from the buyer informing the seller that the
buyer will debit the account or decrease the amount owed to the seller for returned
goods or allowances requested due to defect or wrong specifications
Depreciation is the process of allocating the cost of property, plant and equipment
assets to the periods that will benefit from their use
Depreciation expense is the expense allotted for the wear and tear of property, plant,
and equipment due to passage of time; the annual portion of the cost of tangible assets
such as buildings, machineries, and equipment charged as expense for the year
Dividend income is income received from ownership shares in a corporation. A
dividend is a distribution to a corporations stockholders usually in cash

Documents are bases of recording transactions in bookkeeping. This may include but
not limited to sales invoice and official receipts
Double-entry system is a system where every transaction done uses opposite
corresponding entries to two different accounts and total debits should equal total
credits
Drawing is when a business proprietor draws money for personal needs

Entity Concept is a concept that regards the business enterprise as separate and
distinct from its owners and from other business enterprises
Equipment includes typewriter, air-conditioner, computer, electric fan, trucks and cars
used by the business in its office, store, or factory
Equity represents the residual claims of owners
Estimated useful life is not an exact measurement but merely an estimation of the
number of years an asset can be useful to the entity

Expenses represent the outflow of assets (or increases in liabilities) due to a company’s
operating activities.
Financial statements report the business activities during the year and the financial
condition at the end of the year. It is also the presentation of financial data including
BALANCE SHEETS, INCOME STATEMENTS and STATEMENTS OF CASH FLOW, or any
supporting statement that is intended to communicate an entity's financial position at
a point in time and its results of operations for a period then ended.

Fiscal year is a twelve-month period that starts on any month of the year other than
January and ends twelve months after the start period
FOB is the abbreviation for “free on board”

FOB destination is the freight terms when the seller shoulders the cost of transporting
the goods

FOB destination, freight collect is the freight terms where the goods are free on board
up to the destination and the freight company collects payment for the freight charges
from the buyer
FOB destination, freight prepaid is the freight terms where the goods are free on
board up to the destination and the seller pays for the freight charges at the time of
shipment

FOB shipping point is the freight terms where the buyer shoulders the cost of
transporting the goods from the seller’s place to the buyer’s place
FOB shipping point, freight collect is the freight terms where the goods are free on
board up to the shipping point and the freight company collects payment for the freight
charges from the buyer
FOB shipping point, freight prepaid is the freight terms where the goods are free on
board up to the shipping point, and the seller paid for freight charges at the time of
shipment

Freight is the cost of transporting the merchandise from the seller’s place to the buyer’s
place

Freight-in is the cost of transporting the merchandise or goods from the seller’s place
to the buyer’s place of business and the buyer shoulders the freight cost; also called
transportation-in
Freight-out or delivery expense is the cost of transporting the merchandise or goods
from the seller’s place to the buyer’s place of business and the seller shoulders the
freight cost
Furniture and fixtures includes tables, chairs, carpets, curtains, lamp and lighting
fixtures, and wall decors

Generally accepted accounting principles (GAAP) determine what to record, when to

record, and amount to record. It is also the rules and procedures necessary to define
accepted accounting practice at a particular time.
General Journal is the most basic of journals. It is a chronological list of transactions.
General Ledger is the collection of all ASSET, LIABILITY, OWNERS’ EQUITY,
REVENUE, and expense accounts. This is a book of accounts in which data from
transactions recorded in journals are posted and thereby classified and summarized.
Also called ledger.
Going Concern is a concept which assumes that the business enterprise will continue
to operate indefinitely

Historical Cost is a principle stating that all properties and services acquired by the
business must be recorded at their original acquisition cost
Income is the inflow of REVENUE during a period of time. This is also money received
by a person or organization because of effort (work), or from return on investments.

Income Statement shows the components of net income in detail. It is the summary of
the effect of REVENUES and expenses over a period of time.
Income Summary is a temporary account, considered to be a summary account, used
at the end of the accounting period to close income and expense accounts
Income Taxes Payable is income taxes due including current portion of deferred taxes.

Insurance expense is the expired portion of premiums paid on insurance coverage such
as premiums paid for health or life insurance, motor vehicles, or other properties

Intangible assets are identifiable, non-monetary assets without physical substance

held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes

Interest expense is the amount of money charged to the borrower for the use of
borrowed funds

Interest Income includes amounts from interest on all interest-bearing deposits and
accounts.
Interest receivable is the amount of interest collectible on promissory notes received
from customers and clients
Internal Control is the process designed to provide reasonable assurance regarding
achievement of various management objectives such as the reliability of financial
reports.
Inventories are products on hand for sale to customers, represent the unsold goods at
the end of the accounting period
Journal is a book where all transactions are initially recorded, a chronological record
of events or business transactions showing all the effects of each transaction in terms
of debits and credits
Journal entries are the logging of business transactions and their monetary value into
the accounting journal as either debits or credits. A journal entry is usually backed up
with a piece of paper; a receipt, a bill, an invoice, or some other direct record of the
transaction; making them easy to record and to maintain traceability for each
transaction.
Journalizing is the process of recording a business transaction in the journal after it
has been recognized and measured
Land is a piece of lot or real estate owned by the enterprise on which a building can be
constructed for business purposes
Ledger is a tool used for classifying and summarizing information about increases,
decreases, and balances of items in the chart of accounts. It is the book of final entry.

Liability represents obligations, payables or debts owed. DEBTS or obligations owed by

one entity (DEBTOR) to another entity (CREDITOR) payable in money, goods, or services;
represents the claims of the creditors over the assets of the business
Loans Payable is a liability to pay the bank or other financial institution arising from
funds borrowed by the business from these institutions payable within twelve months
or shorter

Long-term investments are assets held by an enterprise for the accretion of wealth
through capital distribution such as interests, royalties, dividends, and rentals, for
capital appreciation or for other benefits to the investing enterprise such as those
obtained through trading relationships

Manufacturing business is a business which buys raw materials and processes them
to become finished goods for sale
Marketable securities are stocks and bonds purchased by the enterprise and to be
held for only a short span of time or duration. They are usually purchased when a
business has excess cash.

Materiality is a principle stating that financial reporting is only concerned with

information significant enough to affect decisions
Merchandise inventory are goods or commodities purchased by the company for sale
normally at a profit
Mortgage payable is a long-term debt of the business with security or collateral in the
form of real properties

Notes Payable included debts arising from the purchase of an asset or the acquisition
of services on account evidenced by a promissory note

Notes receivable is a promissory note issued by the client or the customer in exchange
for services or goods received as evidence of his/ her obligation to pay
Objectivity Principle is a principle stating that all business transactions that will be
entered in the accounting records must be duly supported by verifiable evidence
Official receipt is a document issued to acknowledge receipt of cash.
Owner’s equity or capital includes the interest of the owners on the business; claims
of the owners on the assets of the business; and the investment of the owner plus or
minus the results of operations
Partnership is a form of entity with two or more owners. Relationship between two or
more persons based on a written, oral, or implied agreement whereby they agree to carry
on a trade or business for profit and share the resulting profits.
Periodicity is the concept behind providing financial accounting information about the
economic activities of an enterprise for specified time periods

Philippine Financial Reporting Standards often known as PFRS are a set of

accounting standards. They are issued by the Financial Reporting Standards Council
[FRSC].
Post-Closing Trial Balance is balance sheet in trial balance form; prepared from the
general ledger accounts after the closing entries have been posted to verify the equality
of the debits and credits

Preliminary Trial Balance is a listing of the accounts in the general ledger and their
balances as of a specified date. A trial balance is usually prepared at the end of an
accounting period and is used to see if additional adjustments are required to any of the
balances.
Posting is the process of transferring figures from the journal to the ledger accounts
Prepaid expenses include supplies bought for use in the business or services and
benefits to be received by the business in the future paid in advance
Prepayments are expenses already paid but not yet incurred or used

Property, Plant, and Equipment are tangible assets that are held by an enterprise for
use in the production or supply of goods or services, or for administrative purposes

Purchase discount is a reduction from the purchase price of the merchandise or goods
bought granted by the supplier to the buyer or customer for paying within the discount
period
Purchase invoice is a bill from a vendor for specific materials or supplies furnished or
services rendered. It is called sales invoice from the point of view of the seller.
Purchases Journal This is a payable system involves a Purchases Journal -- in which
all incoming merchandise invoices are recorded.
Purchase order is a document sent by the buyer to the seller ordering certain goods
where the date, quantity, description of goods, and the total amount of the order are
indicated. This authorizes the seller to deliver the goods to the buyer under the agreed
specifications, terms, and conditions.
Purchase returns and allowances is the account used to record returns
acknowledged or allowances granted by the supplier to the buyer from the purchase of
goods
Purchases is the account used to record the cost of the goods or merchandise bought
for purposes of resale
Purchases journal is a journal which records all purchase transactions on account or
with promissory note
Ratio Analysis is the comparison of actual or projected data for a particular company
to other data for that company or industry in order to analyze trends or relationships
Receivables are amounts of money due from customers or other DEBTORS

Receiving report is a form prepared by the buyer’s receiving personnel stating the
quantity and condition of the goods delivered by the seller
Rent expense is the expenditure made to cover the rental for the premises.
Rent income is money received by a person or organization from rental of premises
and/or other assets
Retained Earnings are profits of the business that have not been paid out to the
shareholders as of the balance sheet date.

Revenue represents the inflow of assets (or decrease in liabilities) due operating
activities. This may include sales of products, merchandise, and services; and earnings
from INTEREST, DIVIDEND, rents.

Routine journal entries Recurring financial activities reflected in the accounting

records in the normal course of business.
Salaries/wages expense is an account title used to record salaries, wages, and benefits
an employee receives from an employer.

Sales are the proceeds from the sales price of goods sold credited to the revenue account
in the accounting period when the sales were made

Sales discount is a reduction from the sales price of the merchandise or goods sold
granted by the seller to the buyer or customer for paying within the discount period
Sales Journal This is a receivables system involves a Sales Journal -- in which all
invoices outgoing to customers are recorded.
Sales invoice is a document issued by a vendor for specific materials or supplies
furnished or services rendered. It is called purchase invoice from the point of view of the
buyer.
Sales returns and allowances is the account used to record returns acknowledged or
allowances granted by the supplier to the buyer from the sale of goods
Salvage value is the estimated value of the asset at the end of its useful life
Service income includes revenues earned or generated by the business in performing
services for a customer or client
Simple entry is a journal entry where there is only one debit account and one credit
account

Sole Proprietorship is a form of entity with one owner and the simplest possible form
of business.

Special journals are columnar books of original entry for recording similar
transactions
Statement of Cash Flow reports sources and uses of cash. This is one of the basic
financial statements that are required as part of a complete set of financial statements
prepared in conformity with generally accepted accounting principles. It categorizes net
cash provided or used during a period as operating, investing and financing activities,
and reconciles beginning and ending cash and cash equivalents
Statement of Changes in Equity explains the changes in contributed capital and
retained earnings during the period; shows the changes in the capital or owner’s equity
as a result of additional investment or withdrawals by the owner, plus or minus the net
income or net loss for the year

Subsidiary Ledger is a group of subsidiary accounts the sum of the balances of which
is equal to the balance of the related control account in the general ledger

Summarizing is preparing the financial statements from the transactions recorded in

the books of accounts that are designed to meet the information needs of its users
Supplies expense covers office supplies used by a business in the conduct of its daily
operations

T-account is the simplest form of an account wherein the accounting equation

resembles the capital letter T

Trade discount is a deduction from the list price or catalogue price granted to
customers to encourage purchase of goods or merchandise in big quantities or volume
Transactions and events are recorded as they occur, recorded even if cash is not
received or paid and affects the accounting equation.
Transplacement/ slide occurs when a decimal point has been moved or misplaced
Transposition is an error that occurs when order of two numbers are reversed
Trial balance is a list of accounts found in the ledger together with the accounts’
balance or total; the schedule of all balances to prove the equality of the debit and credit

Unearned revenues represent obligations of the business arising from advance

payments received before goods or services are provided to the customer
Utilities expense is an expense related to the use of electricity, fuel, water, and
telecommunication facilities
Utilities payable is an obligation to pay utility companies for services received from
them
Voucher is a written record of expenditure, disbursement, or completed transaction.
Worksheet is a common tool and a summary device used by bookkeepers and
accountants to gather on a sheet of paper all the information needed for the preparation
of the financial statements – adjusting entries, closing entries, and the post-closing trial
balance