I-Glossary.docVIP

GLOSSARY Account: Is a record that details the increases and decreases for each asset, liability, and equity item. Account balance: The sum of all the transactions in an account at any specific time. Account form balance sheet: Is a balance sheet arranged horizontally and is in contrast to the report form (arranged on a vertical basis). Accounting: Is often described as a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities. The scope of accounting includes first identifying economic events, then measuring, recording, summarizing, and reporting the information to users. Accounting cycle: Is the series of steps performed each accounting period in preparing financial statements consisting of analyzing, journalizing, posting, preparing an unadjusted trial balance, adjusting, preparing an adjusted trial balance, preparing financial statements, closing, and preparing a post-closing trial balance. Accounting equation: Is Assets = Liabilities + Equity or alternatively Assets – Liabilities = Equity. Accounting periods: Are the time periods covered by financial reports. Accounts payable: Are a type of payable that result from the purchase of goods or services from a supplier on account or on credit. Also referred to as Trade accounts payable. Accounts receivable: Are amounts due from customers as a result of performing a service or selling goods on account or on credit; the customer promises to pay the agreed amount in the future. Accounts receivable turnover: Is a ratio that measures how many times a year a firm’s accounts receivable have been converted into cash calculated as credit sales divided by average accounts receivable balance for the year. Accruals: Are revenues or expenses that have been realized but no cash has changed hands. See Accrued expenses and Accrued revenues. Accrual basis of accounting: Assumes that transactions are recorded when they occur regardless