Glossary of Basic Accounting Terms

From Wikicpa

Contents: Top - 0–9 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

• Account: A systematic arrangement that shows the effect of transactions and other events on a specific asset or equity. A separate account is kept for each asset, liability, revenue, expense, and for capital (owners' equity).

• Adjusting entries: Entries made at the end of an accounting period to bring all accounts up to date on an accrual accounting basis so that correct financial statements can be prepared.

C

• Closing entries: The formal process by which all nominal accounts are reduced to zero and the net income or net loss is determined and transferred to the owners’ equity is known as “closing the ledger,” “closing the books,” or merely “closing.”
• Common stock: An equity capital term.

E

• Event: A happening of consequence to an entity. An event generally is the source or cause of changes in assets, liabilities, and equity. Events may be categorized as external and internal.
• Expense:

F

• Financial statements: Statements that reflect the collection, tabulation, and final summarization of the accounting data. Basically four statements are involved: (1) the balance sheet, which shows the financial condition of the enterprise at the end of a period, (2) the income statement, which measures the results of operations during the period, (3) the statement of retained earnings, which reconciles the balance of the retained earnings account from the beginning to the end of the period. (4) the statement of cash flows which measures the effective changes in the cash accounts.

J

• Journal: The book of original entry where the essential facts and figures in connection with all transactions and selected other events are recorded initially. From the book of original entry the various amounts are transferred to the ledger.

L

• Ledger: The book (or computer printouts) containing the accounts. It usually has a separate page for each account. A general ledger is a collection of all the asset, liability, owners’ equity, revenue, and expense accounts. A subsidiary ledger contains a group of accounts that constitute the details related to a specific general ledger account.

P

• Paid-in capital: Balance sheet item.
• Preferred stock: An equity capital term.
• Posting: The mechanical (electronic) process of transferring the essential facts and figures from the book of original entry to the accounts in the ledger.

R

• Real and nominal accouts: Real accounts are asset, liability, and equity accounts and they appear on the balance sheet. Nominal (also called temporary) accounts are revenue and expense accounts; they appear on the income statement. Nominal accounts are periodically closed; real accounts are not.

T

• Transaction: An external event involving the transfer or exchange of something of value between two (or more) entities.

• Trial balance: A list of all open accounts in the ledger and their balances. A trial balance may be prepared at any time. A trial balance taken immediately after all adjustments have been posted is called an adjusts trial balance. A trial balance taken immediately after closing entries have been posted is designated an after-closing or post-closing trial balance.