Accounting Terminology Guide

May 27, 2020 7:22 pm Published by

A complete record of the transactions recorded in each individualaccount. Conveyance ofland, buildings, equipment or other ASSETS from one person to another for a specificperiodof time for monetary or other consideration, usually in the form of rent. Doctrine that interference of government in business bookkeeping examples and economic affairs should be minimal. A ratio used to indicate the number of times a COMPANY’s averageinventoryis sold during anaccountingperiod. Process designed to providereasonable assuranceregarding achievement of variousmanagementobjectives such as the reliability of financial reports.

Adjusted Basis

Taxable incomeis generally equal to a taxpayer’sADJUSTED GROSS INCOMEduring theTAX YEARless any allowable EXEMPTIONS and deductions. Taxpayers age 65 or older or those under 65 who are retired with permanent and total disability are eligible to claim acreditto reduce the amount of their taxliability. It is designed primarily to benefit those individuals who receive small amounts of retirementINCOME. Each taxpayer is allocated an initial base amount based on his or her filing status determining the credit. The base amount is then reduced by the amount of nontaxable income, or is phased out for taxpayers whoseADJUSTED GROSS INCOMEexceeds certain levels.

What are the 5 types of accounts?

The 5 core types of accounts in accountingAssets.
Income or revenue.

For taxpurposes, these types of transactions are generally subject to a greater level of scrutiny. Agency responsible for keeping track of the owners of bonds and the issuance of stock. Ared herringis not an offer to sell or the solicitation of an offer to buy. Periodin a business cycle when economic activity picks up and the gross national product grows, leading into the expansion phase of the cycle. Comparison of two numbers to demonstrate the basis for the difference between them. Investor-ownedTRUSTwhich invests inreal estateand, instead of payingincometaxon its income, reports to each of its owners his or herpro ratashareof its income for inclusion on their income tax returns.

Abalancesheet that projects the financial position of a business for a futureperiod. ProspectiveFINANCIAL STATEMENTSthat are an entity’s expected financial position, results of operations, and cash adjusting entries flows. A shippingtermthat means that the buyer bears transportation costs from the point of origin. A shippingtermthat means that the seller bears transportation costs to the place of delivery.

Financial Accounting Principles

financial accounting

Thus if the fairmarketvalue is more than thedecedent’s basis, a taxpayers basis in the property received is stepped-up. The financialSTATEMENTthat shows how and why anOWNER’S EQUITY, or capital,ACCOUNThas changed over s specific financialPERIOD. Summary for customers of the transactions that occurred over the preceding month. Costs, excludingacquisitioncosts, incurred to bring a newunitintoproduction. Individual taxpayers who do not itemize their deductions are entitled to astandard deductionamount by which to reduceADJUSTED GROSS INCOMEin arriving attaxable income.

PayScale reportsthat financial accountants earn an average annual salary of $55,255. However, earning potential varies based on factors like location, experience, and education. A bachelor’s or master’s degree online bookkeeping in accounting, finance, economics, business administration or a related field is expected. Five to 10 years of related experience is typical for financial accountants seeking positions at this level.

Payment by a business entity to its owners of items such ascashASSETS, stocks, or earnings. These have the objective of detecting errors orfraudthat have already occurred that could result in a misstatement of thefinancial statements. Ataxexempttrustexclusively for the purpose of paying qualified higher education costs of the trusts designated beneficiary.

The Income Statement

Netofcashreceipts and cash disbursements relating to a particular activity during a specifiedaccountingperiod. cash basis Distribution of a CORPORATION’s earnings to stockholders in the form ofCASH.

financial accounting

Chart Of Accounts

Costs of a business that are not directly associated with theproductionorsaleof goods or services. A CHECK that has been written by the drawer and deducted on his or her records but has not reached the bank for payment and is not deducted from the bankBALANCEby the time the bank issues itsstatement. An amount of something produced, especially during a givenperiodof time. One of two classes ofincome taxed under theINTERNAL REVENUE CODE. Historically,ordinary incomeis taxed at a higher rate than capital gains. A series of equal payments made at the end of equal intervals of time, with compoundintereston these payments. Highest price orrate of returnan alternative course of action would provide.

I would prefer more headings and have the headings linked to learning objectives and exercises. This is something that all commercial texts include, and I find it helpful. I really had a hard time finding my place in the text each time I returned to it. The text does flow in a logical manner, but it is difficult to get the “big picture” from the way the text and individual chapters are organized. It might be very difficult for someone with no accounting background to learn from the text.

If one taxpayer itemizes then the other is required to by law even if the married filing separate taxpayer is unknowing of what is included on the spouses separatereturn. A reason for this might be the prevention of pooling and duplication of deductions. A widely known and accepted measurement or weight used as a basis for a system of measurements. MARKETfor buying and sellingCOMMODITIESor financial instruments for immediate delivery and payment based on the settlement conventions of the particular market.

TheACCOUNTthat reflects the stockholders’ claim to the assets earned from operations and reinvested in corporate operations. If for aCORPORATIONthere are seven statutory options forreorganizationthat would cause the corporation and shareholders to not recognize anyGAINorLOSSon the exchange of stock. A ratio for measuring the relative size of a company’s accounts receivable and the success of itsCREDITand collection policies during anaccountingperiod. An internalreorganizationof acorporationincluding a rearrangement of the capital structure by changing the kind of stock or the number ofshares outstandingor issuing stock instead of bonds.

These have the objective of preventing errors orfraudfrom occurring in the first place that could result in a misstatement of thefinancial statements. Ininsurance, the cost of specified coverage for a designatedperiodof time. Used toaccountfor theacquisitionof anothercompanywhen the acquiring companyexchangesits voting COMMON STOCKfor the voting common stock of the acquired company when certain criteria are met. Process for arriving at a comprehensive plan to solve an individual’s personal, business, and financial problems and concerns. The residualINTERESTin the assets of a business entity that remains after deducting the entity’s liabilities.

Generaltermreferring to the organized trading of securities through the variousEXCHANGESand theOVER-THE-COUNTERMARKET. Organized marketplace in which stocks,COMMON STOCKequivalents, and bonds are traded by members of the exchange, acting both as agents and principals. Generally, the basis of property acquired by INHERITENCE,BEQUESTor device from a DECENDANT is theFAIR MARKET VALUEof the property on the date of the decendant’s death.

Probable future economic benefits obtained as a result of past transactions or events. Any owned tangible or intangible object having economic value useful to the owner. Increase in the value of an ASSET such as a stock, BOND, commodity, or real estate. Gradual and periodic reduction of any amount, such as the periodic writedown of a BOND premium, the cost of an intangible ASSET or periodic payment Of MORTGAGES or other DEBT. Tax imposed to back up the regular income tax imposed on CORPORATION and individuals to assure that taxpayers with economically measured income exceeding certain thresholds pay at least some income tax.

Each state may also use a standard deduction format, but the amounts and computations differ from the federal and from state to state. Certain taxpayers may not be entitled to use the standard deduction.

Cost Accounting: Analyzing Product Profitability

Positive difference that results from selling products and services for more than the cost of producing these goods. Agreement between a future husband and wife that details how the couple’s financial affairs are to be handled both during the marriage and in the event of divorce.

  • James D. Stice, PhD, is the Distinguished Teaching Professor of Accounting in the School of Accountancy at Brigham Young University .
  • He has co-authored three accounting textbooks and published numerous professional and academic articles.
  • In addition, Professor Stice has been involved in executive education for Ernst & Young, Bank of America Corporation, International Business Machines Corporation, RSM, and AngloGold Limited and has taught at INSEAD and CEIBS .
  • He teaches business and accounting to university students and to business professionals around the world.
  • Professor Stice currently serves on the audit committee of Deseret Management Corporation and served on the board of directors of a publicly traded company until it was taken private.
  • He has been recognized for teaching excellence by his department, his college, and the university.

Source of financing whereby an entity’s ASSETS are placed in a special purpose vehicle that issues SECURITIES collateralized by such assets. EXCHANGESandOVER-THE-COUNTERmarkets where securities are bought and sold subsequent to original issuance, which took place in the primary MARKET. Financial and informational DISCLOSURES required by theSECin order to comply with certain sections of the Securities Act of 1933 and the Securities and Exchange Act of 1934.

financial accounting

Some of the more common filings that publicly owned companies must submit are theFORM 10-K,FORM 10-QandFORM 8-K. Variations in business or economic activity that recur with regularity as the result of changes in climate, holidays, and vacations. Process of identifying and monitoring business bookkeeping risks in a manner that offers a RISK /RETURNrelationship that is acceptable to an entity’s operating philosophy. Right granted by the Federal ConsumerCreditProtection Act of 1968 to void aCONTRACTwithin three business days with full refund of any down payment and withoutpenalty.

The amount of thestandarddeduction varies by the type of the taxpayer and changes each year. A schedule of standard deductions is easily found in the instructions for the federal form 1040.

These are a set of rules intended to be a single comprehensive set of rules to govern the capitalization, or inclusion inINVENTORYof direct andindirect costof producing, acquiring and holding property. Under the rules, taxpayers are required tocapitalizethe direct costs and an allocable portion of the indirect costs attributable to real and tangiblepersonal propertyproduced or acquired for resale. The obvious effect of theuniform capitalization rulesis that taxpayers may not take current deductions for these costs but instead must be recovered through DEPRECIATIONorAMORTIZATION. To assume theRISKof buying a newISSUEof securities from the issuingCORPORATIONor government entity and reselling them to the public, either directly or through dealers. The difference between the actual materials costs incurred and the standard costs of those items. The difference between the actualLABORcosts incurred and thestandardlabor costs for the good units produced. Stock rights are rights issued to stockholders of aCORPORATIONthat entitle them to purchase new shares of stock in the corporation for a stated price that is often substantially less than theFAIR MARKET VALUEof the stock.

What is a degree in finance called?

Bachelor of Science (BS): Finance Degree Overview. A Bachelor of Science (B.S.) in Finance degree program covers the principles of economic and securities management. Students can learn the principles of financial analysis, particularly as they apply to economic and business management.

It came about from discussions between theAICPA, otheraccountingrepresentatives and the SEC. Movement from public ownership to private ownership of a COMPANY’s shares either by the company’s repurchase of shares or throughpurchasesby an outside private investor. An independent agency that reviews federal financial transactions and reports directly to Congress. Conventions, rules, and procedures necessary to define acceptedaccountingpractice at a particular time. The highest level of such principles are set by theFINANCIAL ACCOUNTING STANDARDS BOARD . Legal arrangement whereby the owner of atradename, franchisor, contracts with a party that wants to use the name on a non-exclusive basis to sell goods or services, franchisee. Frequently, the franchise agreement grants strict supervisory powers to the franchisor over the franchisee which, nevertheless, is an independent business.

Original costof anASSET, lessACCUMULATED DEPRECIATION, that goes into the calculation of aGAIN or LOSSforTAXpurposes. Charge levied by a governmentalunitonincome, consumption, wealth, or other basis. Increase in the number of shares of acompany’sCOMMON STOCKoutstandingthat result from the issuance of additional shares proportionally to existing stockholders without additional capitalinvestment. Also if the exercise price of an option grant differs from the closing market price per share on the grant date companies must include a description of the method for determining the exercise price. i) Exercise price is based on a lower share price prior to the option grant date. The practice of marking a document with a date that precedes the actual date. e) Out of the Money option – Option granted with an exercise price above themarketprice.

Mathematician employed by an insurance company to calculate PREMIUMS, RESERVES, DIVIDENDS, and insurance, PENSION, and ANNUITY rates, using risk factors obtained from experience tables. Profits that are not paid out as DIVIDENDS but are instead added to the company’s capital base. An expense that has occurred but is not recognized in the accounts. A financial record of an individual ACCOUNT PAYABLE in which entries can be made daily. Formal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.

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