Glossary of Accounting Terms

Accelerated Depreciation: A method of calculating depreciation in which a greater amount of depreciation expense is recorded in the earlier years of an asset’s useful life than in later years.

Accounting Period: Any period of time designated for which financial statements are prepared.

Accounting Procedures: All procedures that discover, identify, record, classify, maintain, and summarize financial information to either produce financial reports or to provide internal control.

Accounting System: The methods and records established to identify, assemble, analyze, classify, record, and report transactions and to maintain accountability for assets and liabilities.

Account Receivable: A customer’s or client’s promise to pay for goods or services provided.

Accounts: Sub-categories of assets, liabilities, equity, revenue and expenses.

Accounts Payable: A firm’s promise to pay for goods or services provided.

Accrual Basis of Accounting: The recognition of revenue when earned and expenses when incurred as distinguished from the cash basis of accounting.

Accumulated Depreciation: The contra asset account that reflects depreciation expense taken in the current and previous periods.

Aging Schedule: A schedule that classifies accounts receivable by the amount of days the receivable has been unpaid.

Allowance for Bad Debts: A contra-asset valuation account used to estimate the portion of accounts receivable that is estimated to be uncollectable.

Amortization: The gradual reduction or liquidation of an amount over a period of time according to a specified schedule.

Annuity: A series of equal money payments made or received at equal intervals over a designated period of time.

Assets: Tangible or intangible things that allow a firm to produce goods and / or services.

Audit: A set of tests and procedures applied by an independent accounting firm to determine the accuracy of financial statements.

Balance Sheet: A financial statement that is used to determine the financial condition of a company. It lists the assets, liabilities, and equity of the firm at the end of an accounting period.

Betterment: An addition made to, or change made in, a capital asset, other than maintenance, that is anticipated to extend its expected useful life or to increase its capacity, efficiency, or quality of output.

Books of Original Entry: Forms on which transactions are initially recorded.

Book Value: The net amount at which an asset or asset group appears on the books of account, as distinguished from its market value.

Business Firm: An organization established to earn a profit by the selling of goods and/or services.

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