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Accounting Definitions |
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Accounts Payable: Accounts of money you owe. A liability that is usually created when you have made a purchase on credit. |
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Accounts Receivable: Accounts of money owed to you for the sale of goods or services. |
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Accrual Basis: A method of accounting where transactions are recorded as they occur regardless of when payment for that transaction is made or received. |
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Accrued Assets: Assets from revenues earned but not yet received. |
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Accrued Expenses: A liability incurred during the accounting period for which payment has not been made. |
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Accrued Income: Income earned during an accounting period but not received or recorded by the end of the period. |
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Aging: The grouping of like transactions by date. Example - sorting invoices by due date. |
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Adjusting Entries: Special accounting entries that are made when you close the books at the end of an accounting period to bring the ledger up to date. |
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Asset: Items that a business or individual owns or are owed. |
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Audit: The scrutinizing of accounting records and supporting documents for accuracy and completeness. |
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Audit Trail: The information within the accounting system that reveals the effects of a transaction. |
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Bad Debt: An account or receivable that has been deemed unrecoverable and written-off. |
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Balance Sheet: A statement listing the total assets and liabilities, indicating the net worth of the company for the given time period. |
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Capital: The right to assets of the owner of a business. |
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Cash Basis: An accounting method where transactions are recorded when the actual change of payment occurs, regardless of when the goods or services are delivered. |
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Certified Financial Statements: Financial statements that have been audited and certified by a CPA. |
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Chart of Accounts: A numerical listing of a businesses accounts. |
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Closing Entries: Journal entries made at the end of the period to return the balance in all accounts to zero and ready the account for the next reporting period. |
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Credit: An entry on the right side of an account - decreases assets or increases liabilities. |
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Debit: An entry on the left side of an account - increases assets or decreases liabilities. |
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Depreciation: The allocation of the cost of a tangible, long-term asset over the useful life. |
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Expenses: The daily costs incurred in running a business. |
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Fiscal: A 12 month accounting period. Not necessarily a calendar year. |
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Form 941: The IRS form filed quarterly to report income tax, FICA, and Medicare withholdings. |
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Form 1099: An IRS form sent to certain vendors whom you have paid more than 600 dollars during the year. |
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General Ledger: The master record of all the balance sheet and income statement account balances. |
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Gross Profit: The amount of net sales minus the amount of cost of sales. |
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Income Statement: A statement that summarizes revenues and expenses. |
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Invoice: A form, sent from the seller to the buyer, listing the items bought, price, terms etc. |
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Journal: A chronological record of transactions, also known as the book of original entry. |
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Ledger: A book containing accounts to which debits and credits are posted from books of original entry. |
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Liability: A debt or obligation. |
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Net sales: The amount left when returns, discounts, and allowances are deducted from sales revenue. |
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Operating Expenses: The expenses that are incurred from the daily operation of the business. |
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Owners's Equity: The owners right to the assets of an entity. |
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Prepaid Expenses: Amounts that are paid in advance for product is not used up during the accounting period. |
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Post: The process of transferring amounts from a journal to the appropriate ledger accounts. |
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Purchase Order: Written instructions to a vendor to ship and bill for the listed items. |
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Reversing Entry: An entry made to reverse a prior entry. |
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Trial Balance: A work sheet showing the balances in each account - used to prove the equality of debits and credits. |
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