Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable.
Accounting – process of identifying, measuring, and reporting financial information of an entity
Accounting Equation – assets = liabilities + equity
Accounts Payable – money owed to creditors, vendors, etc.
Accounts Receivable – money owed to a business, i.e.: credit sales
Accrual Accounting – a method in which income is recorded when it is earned and expenses are recorded when they are incurred
Asset – property with a cash value that is owned by a business or individual
Balance Sheet – summary of a company’s financial status, including assets, liabilities, and equity
Bookkeeping – recording financial information
Cash-Basis Accounting – a method in which income and expenses are recorded when they are paid.
Chart of Accounts – a listing of a company’s accounts and their corresponding numbers
Cost Accounting – a type of accounting that focuses on recording, defining, and reporting costs associated with specific operating functions
Credit – an account entry with a negative value for assets, and positive value for liabilities and equity.
Debit – an account entry with a positive value for assets, and negative value for liabilities and equity.
Depreciation – recognizing the decrease in the value of an asset due to age and use
Double-Entry Bookkeeping – system of accounting in which every transaction has a corresponding positive and negative entry (debits and credits)
Equity – money owed to the owner or owners of a company, also known as “owner’s equity”
Financial Accounting – accounting focused on reporting an entity’s activities to an external party; ie: shareholders
Financial Statement – a record containing the balance sheet and the income statement
Fixed Asset – long-term tangible property; building, land, computers, etc.
General Ledger – a record of all financial transactions within an entity
Income Statement – a summary of income and expenses
Job Costing – system of tracking costs associated with a job or project (labor, equipment, etc) and comparing with forecasted costs
Journal – a record where transactions are recorded, also known as an “account”
Liability – money owed to creditors, vendors, etc
Net Income – cash or other property that can be easily converted to cash
Loan – money borrowed from a lender and usually repaid with interest
Net Income – money remaining after all expenses and taxes have been paid
Non-operating Income – income generated from non-recurring transactions; ie: sale of an old building
Note – a written agreement to repay borrowed money; sometimes used in place of “loan”
Operating Income – income generated from regular business operations
Payroll – a list of employees and their wages
Revenue – total income before expenses.
Single-Entry Bookkeeping – system of accounting in which transactions are entered into one account