Account BalanceDifference between total debits and total credits (including the beginning balance) for an account.Accountingcomprehensive system for collecting, analyzing, and communicating financial informationAccounting Cyclefor a given time period, the cycle of recording accounting data, adjusting the accounts, preparing the financial statements, and closing the temporary accounts; when one accounting cycle ends a new one beginsAccounting EventEconomic occurrence that changes a company's assets, liabilities, or equityAccounting PeriodTime span covered by the financial statements; normally one year, but may be a quarter, month or some other time intervalAccrualAccounting recognition of revenue or expense in a period before cash is exchangedAccrual AccountingAccounting system which recognizes revenues when earned and expenses when incurred regardless of when the related cash is exchangedAdverse OpinionOpinion issued by a certified public accountant that means one or more departures from GAAP in a company's financial statements are so very material the auditors believe the financial statements do not fairly represent the company's statusAdjusting EntryEntry that updates account balances prior to preparing financial statements; a bookkeeping tool. Adjusting entries never affect the Cash accountAllocationsRecognizing expenses by systematically assigning the cost of an asset to periods of useAmerican Institute of CPA'sNational association that serves the education and professional interests of member of the public accounting profession; membership is voluntaryAnnual ReportsDocument companies publish to provide information, including financial statements, to stockholdersAsset Exchange TransactionA transaction that decreases one asset and increases another asset; total asset remain unchanged.Asset Source TransactionA transaction that increases both an asset and a claim on assets ; the three types of asset source transactions are aquisitions from owners (equity), borrowing from creditors (liabilities), or earnings from operations (revenues).Asset Use TransactionA transaction that decreases both an asset and a claim on assets; 3 types are distributions, liability payments, or expensesAssetEconomic resource used to produce revenue which is expected to provide future benefit to the businessAuditsthe verifying of facts or proceduresBalance SheetA financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.Books of original entryA journal in which a transaction is first recorded.Book Valuethe asset's cost minus accumulated depreciation; carrying amount; net amount of a plant assetClaimsOwners' and creditors' interests in a business's assetsClaims Exchange TransactionA transaction that decreases one claim and increases another claim; total claims remain unchanged. for example, accruing interest expense is a claims exchange transaction; liabilities increase, and the expense recognition decreases retained earnings.Code of Professional ConductRules established by the American Institute of Certified Public Accountants to govern the ethical performance of professional services by CPAsClosing EntriesJournal entries used to prepare temporary accounts for a new fiscal periodClosing ProcessThe transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to income summary, transferring the income summary account balance to the retained earnings account, and transferring the dividends account to the retained earnings account.Common StockRepresents ownership in a publicly held company which entitles owners to dividends (if declared by the company's Board of Directors), voting rights on matters affecting the company, and in the elections of Boards members.ConservatismA principle of guides accountants in uncertain circumstances to select the alternative that produces the lowest amount of net incomeContra Asset AccountAn account offset against an asset account on the balance sheet.CostThe amount paid to acquire a resource (asset) or to pay for a resource that has been consumed.CreditEntry on the right side of an account; increases liability and equity accounts or decreases asset accountsDebt to Asset RatioFinancial measure of a company's level of risk, calculated as total debt divided by total assetsDeferralsaccounting recognition of revenue or expense in a period after cash is exchangedDisclaimer of Audit OpinionReport on financial statements issued when the auditor is unable to obtain enough information to determine if the statements conform to GAAP; is neither positive nor negativeDouble Entry AccountingAccounting system in which each transaction affects at least two accounts and has at least one debit and one credit.Equitythe ownership interest of shareholders in a corporationExpenseseconomic sacrifice that is incurred in the process of generating revenueFinancial AccountingAccounting information and analyses prepared for people outside the organization.Financing Activitiesactivities related to cash inflows and outflows from transactions with owners and creditors who supply funds to operate the firm and return to the owners; dividends paid, borrowing money, etc.Generally Accepted Accounting PrinciplesA set of rules used by accountants to prepare financial reportsGeneral Ledgera ledger that contains all accounts needed to prepare financial statementsGeneral JournalAll-purpose journal for recording the debits and credits of transactions and events.Historical CostThis is the idea that we record the value of assets at their purchase (or original cost).Income Statementa financial document that shows how much money (revenues) came in and how much money (expenses) was paid outLiabilitiesOrganization's debts and other financial obligations.Liquidityability to converted an asset into cash quicklyManagerial Accountingthe internal use of accounting statements by managers in planning and directing the organization's activitiesMatching ConceptA concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.Net Incomethe difference between total revenue and total expenses when total revenue is greaterNet LossThe difference between total revenue and total expenses when total expenses are greaterOperating ActivitiesCash flow activities include the cash effects of transactions that create revenues and expenses, and thus enter into the determination of net income.Period CostCosts that are not attached to the inventory. Are counted as expenses in the period incurred.Permanent AccountsAccounts that are not set to zero during the closing process. Assets, liabilities, and capital accounts are permanent accounts.Price Earning RatioThe price of one share of stock divided by the corporation's earnings per stock outstanding over the periodRealizationcollecting moneyRecognitionreporting an accounting event in the financial statementsRetained Earningsearnings retained by a firm for its use rather than paid out as dividendsReturn on Assets RatioNet income / Average total assetsReturn on EquityNet Income/EquityRevenueincome earned from the sale of goods and servicesSecurities and Exchange CommissionGovernment agency having primary responsibility for enforcing the Federal securities laws and regulating the securities industry. It protected investors, listened to complaints, issued licenses and penalized fraud.Salvage ValueEstimate of amount to be recovered at the end of an asset's useful life; also called residual value or scrap value.Statement of Change in Stockholder's Equitystatement that summarizes the transactions that affected the owners equity during the accounting periodStatement of Cash FlowsFinancial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing.T-AccountA tool used to learn the double-entry accounting system. It has the appearance of the letter T. The left side is for debit entries and the right side is for credit entries. The account title appears at the top of the T.Temporary AccountsRevenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting periodUnearned RevenueLiability created when customers pay in advance for products or services; earned when the products or services are later delivered.