Bookkeeping terms and basic accounting definitions. Knowing accounting terminology will make bookkeeping easier. Basis is the total cost of buying an investment or other asset, including the price, commissions, and other charges. This record is called an account for example, since cash appears on the all balance sheets, a separate record is kept of the increases and decreases in cash likewise, a separate record is kept of the increases and decreases for supplies, equipment. Acquisitions as you can see, an acquisition may be only slightly different from a merger. Common accounting terminology glossary alphabetical order. Terminology and definitions accounting this manual begins by defining the basic terms used in accounting functions. Accounting period any period of time utilised to measure accounting performance e. Weve compiled a list of the 42 most common accounting terms, along with their abbreviations where appropriate and definitions. It is separate from the entitys owners and their financial transactions.
The nysscpa has prepared a glossary of accounting terms for accountants and. Accounting terminology guide over 1,000 accounting and. In other words, two or more companies are consolidated into one company. Accounts payable is an account within the general ledger representing. Even though you may be familiar with some of them, it is important to know their exact meanings otherwise you may find yourself becoming confused. A book with the policies, procedures, standards, and guidelines for the accountants of an individual proprietorship or company. Chartstring what is typically called an account or thought of by most people as an account is called a chartstring in peoplesoft ps. Entering into the accounting field can be a little confusing at first with all of the new terminology to learn.
A merger is the combination of two companies into one by either closing the old entities into one new entity or by one company absorbing the other. Understanding the meaning behind basic accounting terms opens the communication between accountants and business. Preferred bidder is the bidder who is selected by the vendor, usually to some predetermined criteria, as being the party to whom it intends to sell the business, or award a contract, subject to the completion of negotiations and legal arrangements. Exposure draft accounting guideline on merger accounting comments to be received by 31 may 2005 issued by the council, hong kong institute of certified public accountants the hong kong institute of certified public accountants council council has issued for consultation an exposure draft of proposed accounting guideline on merger. Harold averkamp cpa, mba has worked as a university accounting instructor, accountant, and consultant for more than 25 years. Accounting meaning, definition and basic of accounting systems.
Understanding the terminology will help you understand the concepts and their relevance to you, and more importantly, they will help you analyze and run your small business. Introduction to accounting basics this explanation of accounting basics will introduce you to some basic accounting principles, accounting concepts, and accounting terminology. This list may not reflect recent changes learn more. Financial statements records that outline the financial activities of a business, an individual or any other entity.
Goodwill is an intangible asset that accounts for the excess purchase. Define the following financial statements in accounting. Related party transactions a term used to define the close relationship between individuals who have entered into or executed a contract. Dont feel left out in conversations and dont be left behind because you arent sure what someone is talking about. Accounting definitions basic accounting terms to know. Account balance an account balance is the sum of debit entries minus the sum of credit entries in an account. An organization created with the objective of making a profit from the sale of goods or services. Check out the accounting terms below and find out what that last conversation was about. If you sell the asset, you subtract your basis, also known as your cost basis, from the selling price to determine your capital gain or capital loss.
Understanding the financial condition of the business and the accounting principles used to determine the financial condition is critical for business owners. It is these kinds of business combinations that are. Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these. An act designed to improve quality and transparency in financial reporting and independent audits and accounting services for public companies, to create a public company accounting oversight board, to enhance the standardsetting process for accounting practices, to strengthen the independence of firms that audit public companies, to increase. All of the following accounting terms have precise definitions when used in business. Learn vocabulary, terms, and more with flashcards, games, and other study tools.
In a pooling of interests, two entities merge through an exchange of. As a result, many transactions qualified as business combinations when they. If positive, the difference is called a debit balance. Tax on the value of a decendents taxable estate, typically defined as the. The firms that agree to merge are roughly equal in terms of size, customers, scale of operations. Articles business list of key accounting terms and definitions list of key accounting terms and definitions if you want to start a business, get better at running your business, or get an accounting job, you need to know some essential financial accounting terms and concepts. Plain language definitions with sample applications. The following 86 pages are in this category, out of 86 total. It is most often used by sole proprietorships and small businesses that dont maintain inventory. Chapter 1 part one identifying accounting terms 22 terms. Accounting there are two types of accounting treatment as disconnected from tax treatment the desired treatment is pooling of interests add up the balance sheets of the two companies at historical cost assets, liabilities, other equity glossary.
Browse and search thousands of accounting abbreviations and acronyms in our comprehensive reference resource. Accounts payable sundry creditors short term or current financial obligations that are created through the purchase of merchandise, or obtaining of service. A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity. The equation that is the basis of the balance sheet. Accounting systems are designed to show the increases and decreases in each part of the above accounting basic equation in a separate record.
Sometimes used with a stronger meaning of understating assets and. The current definition of a business under us gaap affects such areas of accounting as acquisitions, disposals, goodwill, and consolidation. Fasb clarifies definition of a business under gaap. Study define the following financial statements in accounting terms flashcards flashcards at proprofs the following flashcards are the basics of accounting. Accountants use terminology foreign to many outside of this profession. List of all most popular abbreviated accounting terms defined. Exposure draft accounting guideline on merger accounting. Mel king institute definitions of accounting terms for financial statements for cdcs 1. Mel king institute definitions of accounting terms for. An area of public accounting ranging from development of accounting and computer systems to support services for marketing projects and merger and acquisition activities. My accounting course accounting and business dictionary explains 1,000s of accounting terms in plain english.
Hello friends, this session will help you to understand the basic accounting terminology basic accounting terms in a very easy language. Discover the meaning of common bookkeeping terms, words and phrases from this quick a z style guide. As a reallife example, consider the tmobile and sprint merger. All the information you need to run a successful small business is contained. Ifrs 3 business combinations is about accounting at a time when the acquirer successfully acquires control of a particular business for example, merger or acquisition. But stakeholders told the fasb that the definition of a business in topic 805, business combinations, is applied too broadly. Clarification of some accounting terms abbreviations and acronyms for a complete glossary of terms and definitions see textbook pp. It includes not only the maintenance of accounting records but also the preparation of financial and economic related. Cash basis accounting is a simple method of keeping track of revenue and expensesrevenue is recorded when the customer makes payment and expenses are recorded when paid out. Once you become familiar with some of these terms and concepts, you will feel comfortable navigating through the explanations, quizzes, puzzles. Basic accounting terms accounting terminology letstute. The tax terms are the same as those of a purchase merger. Consolidated financial statements financial statements of a group in which assets, liabilities, equity, income, expenses and cash flows of the parent company and its.
Accounting returns studies involve the anal ysis of the accounting performance of the joint entity measured in terms of return on assets or return on equity. In many cases, a preferred means of managing a business combination might be acquiring a controlling amount of stock. Browse the list of 18 867 accounting abbreviations with their meanings and definitions. He is the sole author of all the materials on accountingcoach. For example, you may hear the terms revenues and receipts used interchangeably in casual office conversation. Accounting pooling of interests a marriage of two companies. Just because you passed an audit, it does not mean that your company is in good. If the customer has credit terms, the revenue is not recorded until full payment is. Common accounting terminology glossary alphabetical order account an account is a record used to properly classify the activity recorded in the general ledger. A systematic way of recording and reporting financial transactions for a business or organization. The alphabetical layout will help you easily find the word you need. Accounting definitions and basic accounting terms to know as a small business owner. Accounting is the analysis and interpretation of bookkeeping records. Lets learn some accounting basic terms basic accounting.
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