Dictionary of 1,000+ Accounting Terms

Accounting degrees are designed to offer foundational knowledge in areas such as financial accounting, managerial accounting, auditing, and taxation. A general accounting degree may also include coursework in business finance, financial systems, and cost accounting. These tools income summary assist with managing financial transactions, generating reports, and ensuring compliance with tax regulations. Developing familiarity with accounting software may be valuable for students preparing for accounting-related responsibilities. Accounting principles ensure companies are as transparent, consistent, and objective as possible when reporting their financials and that all metrics and valuation approaches used are the same. For investors, this results in all financial statements being similar and consequently easier to understand, analyze, and compare.

• Financial information should be presented in a simple and easy way so that the users i.e. investors, debenture holders, employees and government officials can understand it easily.
• A DEBT SECURITY that management intends to hold to its MATURITY or payment date and whose cash value is not needed until that date.
• Financial statements are generally prepared on an annual basis and specifically for external parties.
• Accounting standards serve as the rules and guidelines that shape how financial information is recorded and reported.
• The excess of REVENUES over all variable costs related to a particular sales volume.
• An incorporated organization which exists for educational or charitable purposes, and from which its shareholders or trustees do not benefit financially.

Governmental Accounting Standards Board (GASB)

Relevance is a principle of accounting that ensures that financial statements provide information that is useful in making business decisions. Financial statements should include information that is relevant to the needs of users, such as investors, creditors, and management. Accounting is a crucial aspect of any business, as it involves the recording, analyzing, and reporting of financial transactions. It provides a clear picture of a company’s financial health, allowing business owners to make informed decisions. In this section, we will discuss the basics of accounting and its history. Because their reports are regularly scrutinized by oversight agencies, accountants are required to adhere to a uniform set of accounting standards.

Trend Analysis

The allowance is designed to prevent too much taxes being withheld from a taxpayers wages and a person can compute this by completing form W-4 and submitting it to their employer. Characteristic of a SECURITY, commodity, or MARKET to double declining balance depreciation method rise or fall sharply in price within a SHORT-TERM period. The portion of mixed or semi-variable overhead costs that changes proportionately with some measure of activity or output. Total costs that change in direct proportion to changes in productive output or any other measure of volume. Life insurance ANNUITY CONTRACT whose VALUE fluctuates with that of an underlying securities PORTFOLIO or other INDEXof performance.

Understanding Accounting Principles

• The amounts, figures, and other data in the financial reports have meanings that are useful to the users.
• Income from SECURITIES and other non-business investments; such as DIVIDENDS, INTEREST, etc.
• Anyone who maintains financial statements, files taxes, or manages spending becomes familiar with some form of accounting.
• A corporation which is not organized under the laws of ones territories or states.
• This is the practice of recording and reporting financial transactions and cash flows.
• An amount of something produced, especially during a given period of time.

A multicolumn journal used to record business transactions involving the receipt of CASH from other individuals or businesses. A process by which an accountant determines whether and why there is a difference between the balance shown on the bank statement and the balance of the cash account in the firm’s GENERAL LEDGER. Gross income reduced by business and other specified expenses of individual taxpayers. The amount of adjusted gross income affects the extent to which medical expenses, non business casualty and theft losses and charitable contributions may be deductible.

accounting

Ratio measure of the profits achieved by a firm through its basic operations. A measurement of PROFITABILITY that relates the amount earned by a business to the stockholders’ investments in the business. PROFIT on a securities or capital INVESTMENT, usually expressed as an annual percentage rate. Restructuring may occur in the form of changing the components of CAPITAL, renegotiating the terms of DEBT agreements, etc. ACCOUNT used to earmark a portion of EQUITY or fund balance to indicate that it is not available for expenditure.

• Conditional bank commitment issued on behalf of a customer to pay a third party in accordance with certain terms and conditions.
• The measurement and display of the net financial effects of similar type of transactions must be treated in a consistent form.
• Legal process, governed by federal statute, whereby the DEBTS of an insolvent person are liquidated after being satisfied to the greatest extent possible by the DEBTOR’S ASSETS.
• They bring uniformity to financial statements, making it harder for firms to hide information and inflate their numbers.
• Change in EQUITY of a business enterprise during a period from transactions and other events and circumstances from sources not shown in the income statement.
• Collective term for written promissory notes that are due in less than one year and are held by the entity to whom payment is promised.
• In recent years, there has been a growing demand on the part of stakeholders for information concerning the social impacts of corporate decision making.

Curriculum and Learning Experiences in Accounting Programs

The former leaves greater accountancy room for interpretation, while the latter dictates exactly how financial statements should be prepared. Accounting principles, such as GAAP or IFRS, are standards set by regulatory bodies that public companies must adhere to for financial reporting disclosures. This complete financial picture simplifies reporting and decision-making.

Only transactions supported by evidence, such as a receipt or invoice, should be recorded. Companies are able to defer the recognition of some expenses, such as depreciation, to later periods because it is assumed they will continue to operate in the future. Find definitions, related words, common misconceptions, and use cases for beginner to advanced accounting terms. There are no hard and fast legal requirements to become an accountant. Anyone with the right skills, training, or education can take on the job. That said, most employers prefer candidates with a degree in business, accounting, or economics.