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