Principles of Financial Accounting McGraw-Hill Irwin 20th Edition - John J. Wild, Ken W. Shaw, and Barbara Chiappetta (Glossary Definitions)

This is a Free Service provided by Why Fund Inc. (a 501 C3 NonProfit) We thank you for your donation!


(1. Click on the course Study Set you wish to learn.) (2. If you wish you can click on "Print" and print the test page.) (3. When you want to take a test...click on anyone of the tests for that Study Set.) (4. Click on "Check Answers" and it will score your test and correct your answers.) (5. You can take all the tests as many times as you choose until you get an "A"!) (6. Automated college courses created from lecture notes, class exams, text books, reading materials from many colleges and universities.)

New

Long-Term Learning

Learn efficiently and remember over time.

Start Long-Term Learning

Get personalized study reminders at intervals optimized for better retention.
Track your progress on this set by creating a folder
Or add to an existing folder

Add this set to a folder

  • Bank Reconciliation

    Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement.

    Bank Statement

    Bank report on the depositor's beginning and ending cash balances, and a listing of its changes, for a period.

    Canceled Checks

    Checks that the bank has paid and deducted from the depositor's account.

    Cash

    Includes currency, coins, and amounts on deposit in bank checking or savings accounts.

    Cash Equivalents

    Short term investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes.

    Cash Over and Short

    Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments.

    Check

    Document signed by a depositor instructing the bank to pay a specified amount to a designated recipient.

    Check Register

    Another name for cash disbursements journal when the journal has a column for check numbers.

    Committee of Sponsoring Organizations (COSO)

    Committee devoted to improving the quality of financial reporting through effective internal controls, consisting of five interrelated components along with other mechanisms

    Days Sales Uncollected

    Measure of the liquidity of receivables computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365. Also called Days sales in receivables.

    Deposit Ticket

    Lists items such as currency, coins, and checks deposited and their corresponding dollar amounts.

    Deposits in Transit

    Deposits recorded by the company but not yet recorded by its bank.

    Discounts Lost

    Expected rate of return on investments. Also called cost of capital, hurdle rate, or required rate of return.

    Electronic Funds Transfer (EFT)

    Use of electronic communication to transfer cash from one part to another.

    Gross Method

    Method of recording purchases at the full invoice price without deducting any cash discounts.

    Internal Control System

    All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to the company policies.

    Invoice

    Itemized record of goods prepared by the vendor that lists the customer's name, items sold, sales prices, and terms of sale.

    Invoice Approval

    Document containing a checklist of step's necessary for approving the recording and payment of an invoice. Also called check authorization.

    Liquid Assets

    Resources such as cash that are easily converted into other assets or used to pay for goods, services, or liabilities.

    Liquidity

    Availability of resources to meet short term cash requirements.

    Net Method

    Method of recording purchases at the full invoice price less any cash discounts.

    Outstanding Checks

    Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date.

    Principles of Internal Control

    Principles prescribing management to establish responsibility, maintain records, insure assets, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, and perform reviews.

    Purchase Order

    Document listing merchandise needed by a department and requesting it be purchased. O

    Purchase Requisition

    Document listing merchandise needed by a department and requesting it be purchased. R

    Receiving Report

    Form used to report that ordered goods are received, and used to describe their quantity and condition.

    Sarbanes Oxley Act (SOX)

    Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances account and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws.

    Section 404 (of SOX)

    Requires that company management document and assess the effectiveness of all internal control processes that can affect financial reporting. Company auditors express an opinion on whether management's assessment of the effectiveness of internal controls is fairly stated.

    Signature Card

    Includes the signatures of each person authorized to sign checks on the bank account.

    Vendee

    Buyer of goods or services.

    Vendor

    Seller of goods or services.

    Voucher

    Internal file used to store documents information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.

    Voucher Register

    Journal (referred to as book of original entry) in which all vouchers are recorded after they have been approved.

    Voucher System

    Procedures and approvals designed to control cash disbursements and acceptance of obligations.

    Accounts Receivable

    Amounts due from customers for credit sales. Backed by the customer's general credit.

    Accounts Receivable Turnover

    Measure of both the quality and liquidity of accounts receivable. Indicates how often receivables are received and collected during the period. Computed by dividing net sales by average accounts receivable.

    Aging of Accounts Receivable

    Process of classifying accounts receivable by how long they are past due fore purposes of estimating uncollectible accounts.

    Allowance for Doubtful Accounts

    Contra asset account with a balance approximating uncollectible accounts receivable.

    Allowance Method

    Procedure that, # 1 estimates and matches bad debts expense with its sales for the period, and/or, # 2 reports accounts receivable at estimated realizable value.

    Bad Debts

    Accounts of a customer who does not pay what they have promised to pay. An expense of selling on credit. Also called uncollectible accounts.

    Direct Write Off Method

    Method that records the loss from an uncollectible accounts receivable at the time it is determined to be uncollectible. No attempt is made to estimate bad debts.

    Interest

    Charge for using money (or other assets) loaned from one entity to another.

    Maker of the Note

    Entity who signs a note and promises to pay it at maturity.

    Matching (or Expense Recognition) Principle

    Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

    Materiality Constraint

    Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP.

    Maturity Date of a Note

    Date when a note's principal and interest are due.

    Payee of the Note

    Entity, to whom a note is made payable.

    Principal of a Note

    Amount that the signer of a note agrees to pay back when it matures not including interest.

    Promissory Note

    Written promise to pay a specified amount either on demand or at a definite future date. It's a note receivable for the lender, but a note payable for the lendee.

    Realized Value

    Expected proceeds from converting an asset into cash.

    Contingent Liability

    Obligation to make a future payment. If, and only if, an uncertain future event occurs.

    Current Liabilities

    Obligations due to be paid or settled within one year or the company's operating cycle, whichever is longer.

    Current Portion of Long Term Debt

    Portion of long-term debt due within one year or the operating cycle, whichever is longer. Reported under current Liabilities.

    Deferred Income Tax Liability

    Corporation income taxes that are deferred until future years, because of temporary differences between GAAP and the tax rules.

    Employee Benefits

    Additional compensation paid on-behalf of employees, such as premiums for medical, dental, life, and disability insurance, and contributions to pension plans.

    Employee's Earning Reports

    Record of an employee's net pay, gross pay, deductions and year-to-date payroll information.

    Estimated Liability

    Obligation of an uncertain amount that can be reasonably gauged.

    Federal depository bank

    Bank authorized to accept deposits of amounts payable to the federal government.

    FICA (Federal Insurance Contributions Act) Taxes

    Taxes assessed on both employers and employees. For Social Security and Medicare programs.

    F.U.T.A. Federal Unemployment Tax

    Payroll taxes on employers assessed by the federal government to support it's unemployment insurance program.

    Form 940

    IRS form used to report an employer's federal unemployment taxes on an annual filing basis.

    Form 941

    IRS form filed to report F.I.C.A. taxes owed and remained.

    Form W-2

    Annual report by an employer to each employee showing the employee's wages subject to FICA and federal income taxes along with amounts withheld.

    Form W-4

    Withholding allowance certificate, filed with the employer, identifying the number of withholding allowances claimed.

    Gross Pay

    Total compensation earned by an employee.

    Known liabilities

    Obligations of a company with little uncertainty. Set by agreements, contracts, or laws.

    Long Term Liabilities

    Obligations not due to be paid within one year or the operating cycle, whichever is longer.

    Merit Rating

    Rating assigned to an employer by a state based on the employer's record of employment.

    Net Pay

    Gross pay less all deductions. Also called Take-home pay.

    Payroll Bank Account

    Bank account used solely for paying employees. Each pay period an amount equal to the total employees' net pay is deposited in it and the payroll checks are drawn on it.

    Payroll Deductions

    Amounts withheld from an employees' gross pay.

    Payroll Register

    Record for a pay period that shows: the pay period dates, regular and overtime hours worked, gross pay, net pay, and deductions.

    SUTA State Unemployment Taxes

    State payroll taxes on employers to support its unemployment programs.

    Times Interest Earned

    Ratio of income before interest expense (and any income taxes) divided by interest expense. Reflects risk of covering interest commitments when income varies.

    Wage Bracket Withholding Table

    Table of the amounts of income tax withheld from employees' wages.

    Warranty

    Agreement that obligates the seller to correct or replace a product or service when it fails to perform properly within a specified period.

    Please allow access to your computer’s microphone to use Voice Recording.

    Having trouble? Click here for help.

    We can’t access your microphone!

    Click the icon above to update your browser permissions above and try again

    Example:

    Reload the page to try again!

    Reload

    Press Cmd-0 to reset your zoom

    Press Ctrl-0 to reset your zoom

    It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

    Please upgrade Flash or install Chrome
    to use Voice Recording.

    For more help, see our troubleshooting page.

    Your microphone is muted

    For help fixing this issue, see this FAQ.

    Star this term

    You can study starred terms together

    ! Voice Recording

    This is a Plus feature