1.1.

English Accounting Terms

Accounting is the basic process that an individual or an organization uses to record
information about the property that the individual or organization owns, as well as the
property or services that the individual or organization owes. This information is typically
used to help individuals or organizations make decisions related to the individual's or the
organization's finances. There are some basic accounting terms that an individual must
understand in order to use this information:
ACCOUNTING:
Accountant

A person who trained to prepare and maintain financial

records.

Accounting

is a systematic way of recording and reporting financial

transactions.

Accounts

Accounts Payable (AP) is the amount of money you owe

payable

creditors (suppliers, etc.) in return for good and/or services

they have delivered.

Accounts

is the amount of money owed by your customers after goods

Receivable

or services have been delivered and/or used.

Accounting

is the period of time over which an income statement

Period

summarizes the changes in equities.

Assets

are things of value owned by a business. An asset may be a

physical property such as a building, or an object such as a
stock certificate, or it may be a right, such as the right to use
a patented process.

Intangible Assets

are items such as patents, copyrights, trademarks, licenses,

franchises, and other kinds of rights or things of value to a
company, which are not physical objects. These assets may
be the most important ones a company owns. Often they do
not appear on financial reports.

Long Term Asset are usually those assets that are not consumed during the
normal course of business, e.g. land, buildings and
equipment, etc.
Audit

is a formal examination and official endorsement of the

accuracy of the financial statements of the college by an

independent certified public accountant (CPA). Based on

GAAP and FASB rules the college is required to have an
audit performed each fiscal year.
Annual report

is a report prepared by entity that includes its financial

statements, notes to the financial statements, and other
material of interest to investors and other outside parties.

Audit

a careful review of financial records to verify their accuracy

Balance sheet

is a financial report that summarizes a company's assets

(what it owns), liabilities (what it owes) and owners
equity at a given time.
The balance sheet normally lists all assets on the left side or
top while liabilities and capital are listed on the right side or
bottom. The total of all numbers on the left side or top must
equal or balance the total of all numbers on the right side or
bottom. A balance sheet balances according to this equation:
Assets = Liabilities + Capital.
Is a written record of a debt payable more than a year in the

Bond

future. The bond shows amount of the debt, due date, and
interest rate.
Capital Surplus

is an archaic term. See PREMIUM ON CAPITAL STOCK.

Premium on

is excess received over the par value of stock issued. The

capital stock

premium account is shown under the paid-in capital section

of stockholders equity because it resulted from the issuance
of stock. It is not an income statement account since the
company earns profit by selling goods and services to
outsiders, not by issuing shares of stock to owners.

Cash

is money, in the form of notes and coins, which constitutes

payment for goods at the time of purchase.

Cash

&

Equivalent
Coverage
Fixed Charges

means all cash, marketplace securities, and other near-cash

items. Excludes sinking funds.

of

is computed by taking your net income, before taxes and

fixed charges (debt repayment, long-term leases, preferred

stock dividends etc.), and dividing by the amount of fixed

charges
Credit

an accounting entry on the right or bottom of a balance

sheet. Usually an increase in liabilities or capital, or a
reduction in assets. The opposite of credit is debit. Each
credit in a balance sheet has a balancing debit.

Current Assets

are assets that can be expected to turn into cash within a

year or less. Current assets include cash, marketable
securities, accounts receivable, and inventory.

Current liabilities

are those amounts due within one year or less and usually
include accounts payable, accruals, loans due to be paid
within a year, taxes due within a year, and so on.

Debit

an accounting entry on the left or top of a balance sheet.

Usually an increase in assets or a reduction in liabilities.
Every debit has a balancing credit.

debt
Short Term Debt

money etc owed by one person to another

is any debt owed by a company that is due and payable
within one year. The debt is often made up of short-term
bank loans the company is liable for.

Long Term Debt

is all senior debt, including bonds, debentures, bank debt,

mortgages, deferred portions of long term debt, and capital
lease obligations. If a firm shows little to no long term debt
over the years and/or their earning power could allow them
to pay off their long term debt within 3-4 years, it is a good
indicator of a sustainable competitive advantage.

Depreciation

an expense that is supposed to reflect the loss in value of a

fixed asset. For example, if a machine will completely wear
out after ten year's use, the cost of the machine is charged as
an expense over the tenyear life rather than all at once, when
the machine is purchased.

Dividend

a portion of the aftertax profits paid out to the owners of a

business as a return on their investment.

Double Entry

is a system of accounting in which every transaction is

recorded twice as a debit and as a credit.

Double taxation:

The state where income tax is paid twice (often to two

different governments) on one income."A lot of countries
now have double taxation agreements, so people should only
pay the tax in the country where the money was earned."

Retained

are profits of the business that have not been paid out to the

Earnings

owners as of the balance sheet date. The earnings have been

"retained" for use in the business (Retained Earnings is an
account in the equity section of the balance sheet).

Entity Concept

is the concept that financial accounting and reporting relates

only to the activities of a specific business entity and not to
the activities of the owners of that entity.

Equity

is the owners' share of a business.

Shareholders

is total assets minus total liabilities. It is the same as

Equity

EQUITY, NET WORTH and stockholder's equity.

Expenditure

an expenditure occurs when something is acquired for a

business an asset is purchased, salaries are paid, and so on.
An expenditure affects the balance sheet when it occurs.

Expenses

The cost of goods and services, including those that are fixed
(such as rent and auto loan payments) and those that are
variable (such as food, clothing, and entertainment).

Prepaid

are amounts that are paid in advance to a vender or creditor

Expenses

for goods and services.

Ethics

A set of moral principles or beliefs that govern an

individuals actions.

Financial

are a series of reports showing a summary view of the

Statements

various financial activities of the college at a specific point in

time. Each statement tells a different story about the financial
activity of the college.

Fixed Asset

are assets that cannot be quickly turned into cash without

interfering with business operations. Fixed assets include

land, buildings, machinery, equipment, furniture, and

longterm investments.
General Ledger

is a complete record of the financial transactions over the

life of a company.

Goodwill

is that intangible possession which enables a business to

continue to earn a profit that is in excess of the normal or
basic rate of profit earned by other businesses of similar
type.

Income

is a statement of revenues and expenses, and the difference

statement

between them, for an accounting period; a flow report.

Interest

Payment for the use of someone elses money; usually

expressed as an annual rate in terms of a percent of the
principal (the amount owed) - a charge made for the use of
money

Inventory

is the supply or stock of goods and products that a company

has for sale. A manufacturer may have three kinds of
inventory: raw materials waiting to be converted into goods,
work in process, and finished goods ready for sale.

Investment

is the purchase of real property, stocks, bonds, collectible

annuities, mutual fund shares, etc, with the expectation of
realizing income or capital gain, or both, in the future.
Investment is longer term and usually less risky than
speculation.

Short Term

are fixed income investments that mature in less than one yea

Investments
Inflation

An overall rise in the price of goods and services; the

opposite of the less common deflation.

Invoice

is a detailed list of goods shipped or services rendered, with

an account of all costs; an itemized bill.

Journal

a chronological record of business transactions

Ledger

a record of business transactions kept by type or account.

Journal entries are usually transferred to ledgers

Liabilities

amounts owed by a company to others.

Longterm

normally include the amounts of mortgages, bonds, and

liabilities

longterm loans that are due more than a year in the future.

Net income

is the amount by which total revenues exceed total expenses

for an accounting period .

net assets (also

Total assets (fixed and current) less current liabilities and

called total net

long-term liabilities that have not been capitalized (eg, short-

assets)

term loans).

Preferred stock

promises its owner a dividend that is usually fixed in amount

or percent. Preferred shareholders get paid first out of any
profits. They have preference.

Profit

The difference between the cost required to create a product

or supply a service and the money received from selling it.

Profit and Loss is

a financial statement that is used to summarize a

companys

Statement

performance

and

financial

position

by

reviewing revenues, costs and expenses during a specific

period of time; such a quarterly or annually.

Propertiy,

Plant

& Equipment

is the book value of all buildings, land, furniture, and other

physical capital assets that a business has purchased to run its
business net of accumulated depreciation.

Receivable

is an amount awaiting receipt of payment.

Revenue

the amounts received by or due a company for goods or

services it provides to customers. Receipts are cash
revenues. Revenues can also be represented by accounts
receivable.

Rule of Thumb

is a rough and useful principle or method, based on

experience rather than precisely accurate measures.

Savings Account

is a savings account is an account with a bank or building

society in which you save money. Your money will often
earn more interest in a savings account than a current
account, but you may have to give notice before withdrawing
money.

Stock

a certificate (or electronic or other record) that indicates

ownership of a portion of a corporation; a share of stock.
Or, an investment that represents shares of ownership of the
assets and earnings of a corporation.

Common stock

has no preference and no fixed rate of return. Treasury stock

was originally issued to shareholders but has been
subsequently acquired by the corporation .

Tresury Stock

is stock reacquired by the issuing company and available for

retirement or resale. It is issued but not outstanding. It cannot
be voted and it pays or accrues no dividends. It is not
included in any of the ratios measuring values per common
share.

Trial Balance:

A statement of all debits and credits in the double-entry

account book, with any discrepancies shown.

Sample of Coca-Cola Balance Sheet:

Coca-Cola Company
Consolidated Balance Sheet - January 31, 2011
Current Assets
Dec. 31, 2011
Cash & Equivalents
$1,819,000,000
Short Term Investments
$73,000,000
Receivables
$1,757,000,000
Inventories
$1,066,000,000
Pre-Paid Expenses
$1,905,000,000
Total Current Assets
$6,620,000,000

Dec. 31, 2009

$1,611,000,000
$201,000,000
$1,798,000,000
$1,076,000,000
$1,794,000,000
$6,480,000,000

Long Term Assets

Property, Plant, & Equipment
Goodwill
Total Assets

$8,129,000,000
$4,168,000,000
$1,917,000,000
$20,834,000,000

$8,916,000,000
$4,267,000,000
$1,960,000,000
21,623,000,000

$9,300,000,000
$21,000,000
$9,321,000,000

$4,483,000,000
$5,373,000,000
$9,856,000,000

$835,000,000
$1,004,000,000
$358,000,000
$11,518,000,000

$854,000,000
$902,000,000
$498,000,000
$12,110,000,000

$870,000,000

$867,000,000

Current Liabilities
Accounts Payable
Short Term Debt
Total Current Liabilities
Long-Term Liabilities
Long-Term Debt
Other Liabilities
Deferred Long Term Liability Charges
Total Liabilities
Shareholders' Equity
Common Stock

Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholder Equity
Total Stockholder Equity
Treasury Stock
Capital Surplus

$21,265,000,000 $20,773,000,000
($13,293,000,000) ($13,160,000,000)
$3,196,000,000
$2,584,000,000
($2,722,000,000) ($1,551,000,000)
$9,316,000,000
$9,513,000,000