List of Common Accounting Terms and Definitions
Account – a record in the general ledger that is used to collect, classify and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. Accounting – the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.[AICPA] Accounting Equation – a financial equation described as Assets = Liabilities + Owner’s Equity. For a corporation the equation is Assets = Liabilities + Stockholders’ Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets. Because of double-entry accounting this equation should be in balance at all times. The accounting equation is expressed in the financial statement known as the balance sheet or statement of financial position. Accrual – a basis in accounting that means income is recognized when earned regardless of when received and expense is recognized when incurred regardless of when paid. Additional Paid in Capital – the capital contributed by the stockholders in excess of the par or stated value of the stock subscribed and issued. Assets – a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity Available-for-sale Financial Assets (AFS) – are any non-derivative financial assets designated on initial recognition as available for sale or any other instruments that are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. ] AFS assets are measured at fair value in the balance sheet. [IAS 39] Balance sheet (Statement of Financial Position) – is one of the major components of a complete set of financial statements. The balance sheet reports the assets, liabilities, and owner’s (stockholders’) equity at a specific point in time, such as December 31. The balance sheet is also referred to as the Statement of Financial Position. Capital Stock – the portion of the paid in capital representing the total par or stated value of the shares of stock issued. Cash Basis – an accounting method in which revenue is recognized when received regardless of when earned. All collections are treated as revenue and there are no accruals and deferrals. Cash Flow Statement – one of the main financial statements, the statement of cash flows analyses changes in cash and cash equivalents during a period. It reports the sources and uses of cash and cash equivalents by operating activities, investing activities, financing activities, and certain supplemental information for the period specified in the heading of the statement. Cash and Cash Equivalents - comprise cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. [IAS 7] Contingency – a condition or situation involving gain or loss, the ultimate outcome of which will be confirmed only upon the occurrence or nonoccurrence of one or more future uncertain events. [IAS 10] Current Assets – are cash; cash equivalent; assets held for collection, sale, or consumption within the entity’s normal operating cycle; or assets held for trading within the next 12 months. All other assets are noncurrent.[IAS 1.66] Current Liabilities - are those to be settled within the entity’s normal operating cycle or due within 12 months, or those held for trading, or those for which the entity does not have an unconditional right to defer payment beyond 12 months. Other liabilities are noncurrent. [IAS 1.69] Derivative - a financial instrument (a) whose value changes in response to the change in an underlying variable such as an interest rate, commodity or security price, or index;...
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