Business / Accounting Glossary

Adjusting Entries: Entries required at the end of each accounting period to recognize, on an accrual basis, revenues and expenses for the period and to report proper amounts for asset, liability, and owners' e . . . View Full Definition

Adjustments To Gross Income: Amounts deducted from the gross income of an individual taxpayer in arriving at adjusted gross income: includes contributions to individual retirement plans and alimony paid.

Advanced Corporation Tax (ACT): This is corporation tax paid in advance when a limited company issues a dividend. ACT is then deducted from the total corporation tax due when it has been calculated at year end. ACT was abo . . . View Full Definition

Adverse Opinion: Audit report indicating the auditor believes the overall financial statements are so materially misstated or misleading that the statements do not fairly represent the financial position or . . . View Full Definition

Aging Accounts Receivable: The process of categorizing each account receivable by the number of days it has been outstanding.

Allowance For Noncollectible Accounts: A contra account, deducted from Accounts Receivable, that shows the estimated losses from uncollectible accounts.

Allowance Method: The recording of estimated losses due to uncollectible accounts as expenses during the period in which the sales occurred.

Amortization: The depreciation (or repayment) of an (usually) intangible asset (eg. loan, mortgage) over a fixed period of time. Example: if a loan of 12,000 is amortized over 1 year with no interest, the . . . View Full Definition

Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a percentage rather than a dollar amount.

Annual Report: A document that summarizes the results of operations and financial status of a company for the past year and outlines plans for the future.

Annualize: To convert anything into a yearly figure. Eg. if profits are reported as running at £10k a quarter, then they would be £40k if annualized. If a credit card interest rate was quoted as 1% a m . . . View Full Definition

Annuity: A series of equal amounts to be received or paid at the end of equal time intervals.

Appropriation Account: An account in the nominal ledger which shows how the net profits of a business (usually a partnership, limited company or corporation) have been used.

Arms-Length Transactions: Business dealings between independent and rational parties who are looking out for their own interests.

Arrears: Bills which should have been paid. For example, if you have forgotten to pay your last 3 months rent, then you are said to be 3 months in arrears on your rent.

Articulation: The interrelationships among the financial statements.

Asset Turnover Ratio: An overall measure of how effectively assets are used during a period: computed by dividing net sales by average total assets.

Assets: Assets represent what a business owns or is due. Equipment, vehicles, buildings, creditors, money in the bank, cash are all examples of the assets of a business. Typical breakdown includes ' . . . View Full Definition

At Cost: The 'at cost' price usually refers to the price originally paid for something, as opposed to, say, the retail price.

Audit: The result of an independent accountant's review of the statements and footnotes to ensure compliance with generally accepted accounting principles and to render an opinion on the fairness o . . . View Full Definition

Audit Committee: Members of a client's board of directors who are responsible for dealing with the external and internal auditors.

Audit Report: A report issued by an independent CPA that expresses an opinion about whether the financial statements present fairly a company's financial position, operating results, and cash flows in acc . . . View Full Definition

Audit Trail: A list of transactions in the order they occurred.

Authorized Stock: The amount and type of stock that may be issued by a company, as specified in its articles of incorporation.

Available-For-Sale Securities: Debt and equity securities not classified as trading, held-to-maturity, or equity method securities.

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