A
VI
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ST
, AccountingCoach.com’s
Dictionary of Accounting Terms
Table of Contents
A Pages: 2 - 9 N Pages: 68 -71
B Pages: 10 -13 O Pages: 72 -75
C Pages: 14 -26 P Pages: 76 -84
D Pages: 27 -33 Q Page: 85
ST
E Pages: 34 - 37 R Pages: 86 -91
F Pages: 38 - 44 S Pages: 92 -99
G Pages: 45 - 47 T Pages: 100 -103
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H Pages: 48 - 49 U Pages: 104 -106
I Pages: 50 - 55 V Pages: 107 -108
VI
J Pages: 56 -57 W Pages: 109 -111
K Page: 57 X Page: 112
L Pages: 58 -62 Y Page: 112
A
M Pages: 63 - 67 Z Page: 112
For personal use by the original purchaser only. Copyright © 2009 AccountingCoach.com. 1
, Accounting Terms (A)
ABC
See activity-based costing.
absorption costing
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products
being manufactured. This system, which treats fixed manufacturing costs as a product cost, is
required for external financial statements.
accelerated depreciation
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that
the amount of depreciation in the earlier years of an asset's life is greater than the straight-line
amount, but will be less in the later years. In total the amount of depreciation over the life of the
asset will be the same as straight-line depreciation. The difference between accelerated and
straight-line is the timing of the depreciation. For profitable companies, the use of accelerated
depreciation on the income tax return will mean smaller cash payments for income taxes in the
earlier years and higher cash payments for income taxes in later years. To learn more, see
Explanation of Depreciation.
account
ST
A record in the general ledger that is used to collect and store similar information. For example, a
company will have a Cash account in which every transaction involving cash is recorded. A
company selling merchandise on credit will record these sales in a Sales account and in an
Accounts Receivable account.
accounting equation
U
Assets = Liabilities + Owner's Equity. For a corporation the equation is Assets = Liabilities +
Stockholders' Equity. Because of double entry accounting this equation should be in balance at
all times. The accounting equation is expressed in the financial statement known as the balance
VI
sheet. To learn more, see Explanation of Accounting Equation.
accounting net income flows
The amounts reported on the income statement. Because of accrual accounting the net income
flows will be different from the cash flow.
A
accounting principles
The standards, rules, guidelines, and industry-specific requirements for financial reporting. To
learn more, see Explanation of Accounting Principles.
accounting principles board (APB)
This group preceded the current Financial Accounting Standards Board (FASB). The APB
members served in a part-time capacity to determine the accounting standards from 1962 to 1973.
The accounting rules established by the APB were titled Opinions and remain as part of the
generally accepted accounting principles (unless superseded by standards issued by the FASB).
accounting rate of return
An indicator of profitability that is measured by dividing the accounting net income by the amount
invested.
accounting research bulletin (ARB)
These pronouncements were issued by the Committee on Accounting Procedures of the
American Institute of Certified Public Accountants during the years 1953 to 1959. They were and
are part of the generally accepted accounting principles unless superseded by pronouncements
of the APB or FASB.
For personal use by the original purchaser only. Copyright © 2009 AccountingCoach.com. 2
, accounts payable
This current liability account will show the amount a company owes for items or services
purchased on credit and for which there was not a promissory note. This account is often referred
to as trade payables (as opposed to notes payable, interest payable, etc.)
accounts receivable
A current asset resulting from selling goods or services on credit (on account). Invoice terms such
as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash
sale.
accounts receivable - net
The combined amount of the debit balance in the current asset account Accounts Receivable and
the credit balance in the contra asset account Allowance for Doubtful Accounts. The difference
between the balances in these two accounts is an approximation of the amount of the accounts
receivable that is likely to turn to cash (be collected).
accounts receivable turnover ratio
The financial ratio which indicates the speed at which a company collects its accounts receivable.
If a company's turnover is 10, this means the company's accounts receivable are turning over 10
times per year. It indicates that the company, on average, is collecting its receivables in 36.5 days
(365 days per year divided by 10). To learn more, see Explanation of Financial Ratios.
ST
accrual basis of accounting
The accounting method under which revenues are recognized on the income statement when
they are earned (rather than when the cash is received). The balance sheet is also affected at the
time of the revenues by either an increase in Cash (if the service or sale was for cash), an
increase in Accounts Receivable (if the service was performed on credit), or a decrease in
Unearned Revenues (if the service was performed after the customer had paid in advance for the
U
service).
Under the accrual basis of accounting, expenses are matched with revenues on the income
statement when the expenses expire or title has transferred to the buyer, rather than at the time
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when expenses are paid. The balance sheet is also affected at the time of the expense by a
decrease in Cash (if the expense was paid for when it incurred), an increase in Accounts Payable
(if the expense will be paid in the future), or a decrease in Prepaid Expenses (if the expense was
paid in advance).
A
accrual method of accounting
See accrual basis of accounting.
accrual-type adjusting entry
An adjusting entry made at the end of the accounting period in order to report (1) revenues that
have been earned but not yet entered into the accounting records, (2) expenses that have been
incurred but have not yet been entered into the accounting records, (3) revenues already
recorded that involve more than the current accounting period, or (4) expenses already recorded
that involve more than the current accounting period. To learn more, see Explanation of Adjusting
Entries.
accruals
See accrual-type adjusting entry.
accrue
To report a revenue or expense that has occurred, but has not yet been entered in the accounting
records as of the end of the accounting period. To learn more, see Explanation of Adjusting
Entries.
For personal use by the original purchaser only. Copyright © 2009 AccountingCoach.com. 3
VI
U
ST
, AccountingCoach.com’s
Dictionary of Accounting Terms
Table of Contents
A Pages: 2 - 9 N Pages: 68 -71
B Pages: 10 -13 O Pages: 72 -75
C Pages: 14 -26 P Pages: 76 -84
D Pages: 27 -33 Q Page: 85
ST
E Pages: 34 - 37 R Pages: 86 -91
F Pages: 38 - 44 S Pages: 92 -99
G Pages: 45 - 47 T Pages: 100 -103
U
H Pages: 48 - 49 U Pages: 104 -106
I Pages: 50 - 55 V Pages: 107 -108
VI
J Pages: 56 -57 W Pages: 109 -111
K Page: 57 X Page: 112
L Pages: 58 -62 Y Page: 112
A
M Pages: 63 - 67 Z Page: 112
For personal use by the original purchaser only. Copyright © 2009 AccountingCoach.com. 1
, Accounting Terms (A)
ABC
See activity-based costing.
absorption costing
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products
being manufactured. This system, which treats fixed manufacturing costs as a product cost, is
required for external financial statements.
accelerated depreciation
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that
the amount of depreciation in the earlier years of an asset's life is greater than the straight-line
amount, but will be less in the later years. In total the amount of depreciation over the life of the
asset will be the same as straight-line depreciation. The difference between accelerated and
straight-line is the timing of the depreciation. For profitable companies, the use of accelerated
depreciation on the income tax return will mean smaller cash payments for income taxes in the
earlier years and higher cash payments for income taxes in later years. To learn more, see
Explanation of Depreciation.
account
ST
A record in the general ledger that is used to collect and store similar information. For example, a
company will have a Cash account in which every transaction involving cash is recorded. A
company selling merchandise on credit will record these sales in a Sales account and in an
Accounts Receivable account.
accounting equation
U
Assets = Liabilities + Owner's Equity. For a corporation the equation is Assets = Liabilities +
Stockholders' Equity. Because of double entry accounting this equation should be in balance at
all times. The accounting equation is expressed in the financial statement known as the balance
VI
sheet. To learn more, see Explanation of Accounting Equation.
accounting net income flows
The amounts reported on the income statement. Because of accrual accounting the net income
flows will be different from the cash flow.
A
accounting principles
The standards, rules, guidelines, and industry-specific requirements for financial reporting. To
learn more, see Explanation of Accounting Principles.
accounting principles board (APB)
This group preceded the current Financial Accounting Standards Board (FASB). The APB
members served in a part-time capacity to determine the accounting standards from 1962 to 1973.
The accounting rules established by the APB were titled Opinions and remain as part of the
generally accepted accounting principles (unless superseded by standards issued by the FASB).
accounting rate of return
An indicator of profitability that is measured by dividing the accounting net income by the amount
invested.
accounting research bulletin (ARB)
These pronouncements were issued by the Committee on Accounting Procedures of the
American Institute of Certified Public Accountants during the years 1953 to 1959. They were and
are part of the generally accepted accounting principles unless superseded by pronouncements
of the APB or FASB.
For personal use by the original purchaser only. Copyright © 2009 AccountingCoach.com. 2
, accounts payable
This current liability account will show the amount a company owes for items or services
purchased on credit and for which there was not a promissory note. This account is often referred
to as trade payables (as opposed to notes payable, interest payable, etc.)
accounts receivable
A current asset resulting from selling goods or services on credit (on account). Invoice terms such
as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash
sale.
accounts receivable - net
The combined amount of the debit balance in the current asset account Accounts Receivable and
the credit balance in the contra asset account Allowance for Doubtful Accounts. The difference
between the balances in these two accounts is an approximation of the amount of the accounts
receivable that is likely to turn to cash (be collected).
accounts receivable turnover ratio
The financial ratio which indicates the speed at which a company collects its accounts receivable.
If a company's turnover is 10, this means the company's accounts receivable are turning over 10
times per year. It indicates that the company, on average, is collecting its receivables in 36.5 days
(365 days per year divided by 10). To learn more, see Explanation of Financial Ratios.
ST
accrual basis of accounting
The accounting method under which revenues are recognized on the income statement when
they are earned (rather than when the cash is received). The balance sheet is also affected at the
time of the revenues by either an increase in Cash (if the service or sale was for cash), an
increase in Accounts Receivable (if the service was performed on credit), or a decrease in
Unearned Revenues (if the service was performed after the customer had paid in advance for the
U
service).
Under the accrual basis of accounting, expenses are matched with revenues on the income
statement when the expenses expire or title has transferred to the buyer, rather than at the time
VI
when expenses are paid. The balance sheet is also affected at the time of the expense by a
decrease in Cash (if the expense was paid for when it incurred), an increase in Accounts Payable
(if the expense will be paid in the future), or a decrease in Prepaid Expenses (if the expense was
paid in advance).
A
accrual method of accounting
See accrual basis of accounting.
accrual-type adjusting entry
An adjusting entry made at the end of the accounting period in order to report (1) revenues that
have been earned but not yet entered into the accounting records, (2) expenses that have been
incurred but have not yet been entered into the accounting records, (3) revenues already
recorded that involve more than the current accounting period, or (4) expenses already recorded
that involve more than the current accounting period. To learn more, see Explanation of Adjusting
Entries.
accruals
See accrual-type adjusting entry.
accrue
To report a revenue or expense that has occurred, but has not yet been entered in the accounting
records as of the end of the accounting period. To learn more, see Explanation of Adjusting
Entries.
For personal use by the original purchaser only. Copyright © 2009 AccountingCoach.com. 3
