MGT101 Glossary by Syed Ali

GLOSSARY

ACCOUNTING CYCLE

The procedures for analyzing, recording, classifying, summarizing, and reporting the transactions of a business.

ACCOUNT PAYABLE

An amount owed to a supplier for good or services purchased on credit; payment is due within a short time period, usually 30 days or less.

ACID-TEST RATIO (OR QUICK RATIO)

A measure of a firm's ability to meet current liabilities; more restrictive than the current ratio, it is computed by dividing net quick assets (all current assets, except inventories and prepaid expenses) by current liabilities.

BAD DEBT

An uncollectible account receivable.

DEFERRED INCOME TAXES

An account used to record the difference between income tax expense on the income statement and income taxes payable for the year to federal and state governments.

DIVIDEND PAYMENT DATE

The date on which a corporation pays dividends to its shareholders.

DOUBLE-ENTRY ACCOUNTING

A system of recording transactions in a way that maintains the equality of the accounting equation.

DRAWINGS ACCOUNT

The account used to reflect periodic withdrawals of earnings by the owner (proprietor) or owners (partners) of a proprietorship or partnership.

EFFECTIVE-INTEREST AMORTIZATION

A method of systematically writing off a bond premium or discount that takes into consideration the time value of money and results in an equal rate of amortization for each period.

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB)

The private organization responsible for establishing the standards for financial accounting and reporting in the United States.

FOB (FREE-ON-BOARD) DESTINATION

A business term meaning that the seller of merchandise bears the shipping costs and maintains ownership until the merchandise is delivered to the buyer.

GOING CONCERN

The idea that an accounting entity will have a continuing existence for the foreseeable future.

GROSS MARGIN

The excess of net sales revenue over the cost of goods sold.

GROSS MARGIN METHOD

A procedure for estimating the amount of ending inventory; the historical relationship of cost of goods sold to sales revenue is used in computing ending inventory.

GROSS SALES

Total recorded sales before deducting any sales discounts or sales returns and allowances.

GROSS TAX LIABILITY

The amount of tax computed by multiplying the tax base (taxable income) by the appropriate tax rates.

HELD-TO-MATURITY SECURITIES

Debt securities purchased by an investor with the intent of holding the securities until they mature.

HISTORICAL COST

The dollar amount originally exchanged in an arm's-length transaction; an amount assumed to reflect the fair market value of an item at the transaction date.

HISTORICAL EXCHANGE RATE

The exchange rate that existed on the date of a transaction.

HORIZONTAL ANALYSIS OF FINANCIAL STATEMENTS

A technique for analyzing the percentage change in individual income statement or balance sheet items from one year to the next.

IMPREST PETTY CASH FUND

A petty cash fund in which all expenditures are documented by vouchers or vendors' receipts or invoices, the total of the vouchers and cash in the fund should equal the established balance.

INCOME STATEMENT (STATEMENT OF EARNINGS)

The financial statement that summarizes the revenues generated and the expenses incurred by an entity during a period of time.

ACCRUED EXPENSES

Expenses that arise through adjusting entries when accounting for unrecorded expenses.

ADJUSTED GROSS INCOME

An individual taxpayer's total income minus deductions (adjustments) for individual retirement plan contributions and alimony paid.

ADJUSTMENTS TO GROSS INCOME

Amounts deducted from the gross income of an individual taxpayer in arriving at adjusted gross income; includes contributions to individual retirement plans and alimony paid.

ADVERSE OPINION

Audit report indicating the auditor believes the overall financial statements are so materially misstated or misleading that the statements do not fairly represent the financial position or results of the operations and cash flows.

AGING ACCOUNTS RECEIVABLE

The process of categorizing each account receivable by the number of days it has been outstanding.

ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

A contra account, deducted from Accounts Receivable, that shows the estimated losses from uncollectible accounts.

ANNUITY

A series of equal amounts to be received or paid at the end of equal time intervals.

ASSETS

Economic resources that are owned or controlled by an entity.

BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

The financial statement that shows the assets, liabilities, and owners' equity of an entity at a particular date.

BANK RECONCILIATION

The process of systematically comparing the cash balance as reported by the bank with the cash balance on the company's books and explaining any differences.

BOARD OF DIRECTORS

Individuals elected by the stockholders to govern a corporation.

BOND

A contract between a borrower and a lender in which the borrower promises to pay a specified rate of interest for each period the bond is outstanding and repay the principal at the maturity date.

BOND DISCOUNT

The difference between the face value and the sales price when bonds are sold below their face value.

BUSINESS EXPENSES

Expenses that have been paid or incurred in the course of business and that are ordinary, necessary, and reasonable in amount