What is meant by all financial resources? The concept used in the preparation of the statement of changes in financial position when exchange transactions, such as the exchange of land for capital stock, are considered as both a source and a use of net working capital or cash.
What is meant by the appropriation of retained earnings? A restriction of retained earnings that occurs when the board of directors transfers a portion of the retained earnings account into a separate appropriated retained earnings account in order to indicate to stockholders, and to others, that the balance in the appropriated retained earnings account is …
What is Adjunct Account? An account, the balance of which is added to the corresponding account in the financial statements is called an adjunct account.
What is meant by Annuity? An annuity is a series of equal payments or receipts at regular intervals.
What is the Accelerated Cost Recovery System (ACRS)? The system for recovering the cost of capital expenditure by which the cost of depreciable property is recovered over either a 3-, 5-, 10- or 15-year-period of time, depending upon the nature of the asset.
What is the average collection period? The average collection period is a ratio that measures the average number of days it takes before the receivable is collected.
What is the Allowance Method? Allowance method is a method of matching the uncollectible account expense and the sales as yet uncollected for the period with the sales for the period. Reqauires an estimate of the uncollectible account expense in the period of the sale.
What is meant by the term “allowance for uncollectible accounts”? A contra accounts receivable account in which appears the estimated total of the as yet unidentified accounts receivable that will remain uncollected is called allowance for uncollectible accounts.
What is Aging Method? The aging method is a method of estimating uncollectible accounts expense that attempts to estimate the percentage of the outstanding receivables at year-end that will ultimately remain uncollected.
Define the term Administrative Controls Administrative controls are a plan of organization and procedures, and record regarding the decision process leading to management’s authorization of transactions.
What is Accounts payable trial balance? Account payable trial balance or schedule of accounts payable is a list of the balances in all of the subsidiary accounts payable accounts.
What are Internal Controls? Internal Controls is a Plan of organization, and the procedures and records concerned with the safeguarding of assets and the reliability of the financial records. Basic Principles of an internal control system An internal control system should be designed to meet a firm’s specific informational needs. Thus, the system can range, …
What is meant by Auditor’s Report? Auditor’s Report is a report by an independent CPA that accompanies the financial statements and the accountant’s opinion regarding the fairness of presentation of the financial statements.
What are adjusting entries? Adjusting entries are the entries that record accruals and internal transactions that are necessary to the application of the accrual basis of accounting.
What is the adjusted trial balance? Adjusted trial balance is a listing of the general ledger accounts balances after the adjustments have been posted.
What is meant by the accounting term “Accruals”? Accruals are those expenses that are incurred and the revenues that are earned over time, but which are recorded periodically only. Accruals Accounting Definition Accruals accounting is the traditional system of accounting in which income is compared with expenditure to arrive at the profit over a period …
What is meant by Accrual basis? Accrual basis may be defined as the accounting system in which revenues, expenses, and other changes in assets, liabilities, and owner’s equity are accounted for in the period in which the economic event takes place, not when the cash inflows and outflows take place.
What is an accounting information system? Accounting information system is a system designed to provide financial information about economic entities.
What is the accounting cycle? Accounting cycle is a set of standardized procedures performed in monthly, quarterly, or yearly sequences, depending on the needs of the business.
What is meant by Account? An account is a record that summarizes all the transactions that affect a particular category of asset, liability, or stockholders’ equity.
What is Audit? Audit is an examination of a firm’s financial statements by a CPA firm.
What is Articulation? Articulation is the relationship in which the income statement, balance sheet, retained earnings statement, and statement of changes in financial position are all linked together. For Example, the amount in one statement, such as net income on the income statement, is carried forward to another statement, in this case, the retained earnings …
American Accounting Association (AAA) is a professional association of accountants, principally academics and practicing accountants, who are concerned with accounting education and research.
Definition of Accounting System Accounting system is a set of methods and procedures that is used to record, classify, and summarizes the financial information to be distributed to users.
Accounting Equation – Definition Accounting equation is an algebraic expression of financial position, i.e. Assets = Liability + Owner’e Equity
Definition of Accounting Accounting may be defined as a system of providing quantitative information about economic entities, primarily financial in nature, that is intended to be useful in making economic decisions.
Although Basic Principles of Accounting are almost the same all over the world but the American Accounting practices differ to some extent from the British Accounting practices. Some American terms are given below which are equivalent to British terms: Sr. No. British Terms American Terms 1 Goods Merchandise 2 Stock Inventory 3 Purchases on credit Purchases …
What is an accounting period? Definition The length of time for which separate business records (financial statements) are prepared is known as accounting period. Accounting period varies according to the nature of the business. It may consist of three months or six months but normally accounting period consists of one year. Example If a business maintains …
Definition A recorded summary of all transactions related to a particular person or thing is called an account. Example Building Account, Plant Account, Salaries Account, Rent Account etc.
Definition Those valuable things which are possessed by the business are called assets. OR Assets are economic resources that are owned by a business and are expected to benefit future operations. OR Properties, things and receivables having certain values owned by the business are called assets. Example The following are some examples of assets. Land, …
What is meant by Average Cost? Average cost is the inventory costing method by which a weighted average cost, determined by dividing the total cost of goods available for sale by the number of units available for sale, is applied to both the cost of goods sold and the ending inventory.
The degree of freedom to make decisions is called autonomy.
Appraisal costs can be defined as the category of costs in a cost of quality program incurred in detecting which individual products of those produced do not conform to specification.
Factory overhead allocated to products (or services), usually by means of some budgeted (predetermined) rate is called applied factory overhead.
Costs that parties to a contract agree to include in the cost be reimbursed are called allowable costs.
Amounts determined on the basis of costs incurred (historical costs), as distinguished from predicted or forecasted costs.
A costing method that allocates actual direct costs to products and uses actual rates to apply Indirect costs based on the actual inputs of the indirect cost application base.
Definition of Activity-based accounting A process of accounting that focuses on activities as the primary cost objects and uses the costs of these activities as building blocks for compiling the costs of other cost objects (such as a product or a department). Also called activity-based costing or activity accounting.
Actual accounting rate of return can be defined as an accounting measure of income divided by an accounting measure of investment. Also called Accounting rate of return.
Cost estimation approach in which the cost accounts in the ledger are classified as variable, fixed, or mixed is called Account analysis method.
What is Accelerated Depreciation? Any pattern of depreciation is called accelerated depreciation that writes off depreciable assets more quickly than does straight-line depreciation. or Methods of depreciation that allocate a greater portion of the asset’s cost the early years of its useful life, and consequently less to the later years.
Absorption costing can be defined as the method of inventory costing that includes all direct manufacturing costs and all indirect manufacturing costs (both variable and fixed) as inventorial costs.
The spoilage that is not expected to arise under efficient operating conditions is called abnormal spoilage. It is not, an Inherent part of the selected production process.