Glossary
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Discontinued Operations
— A segment
of a business that is no longer part of regular
operations.
E
Equity
—The net worth of a business, after
all assets have been sold and all liabilities
have been paid.
Event
— An occurrence in business where
nothing of value is traded and no transaction
is recorded.
Expense Recognition
— Expense
recognition requires that expenses must be
recorded in the same period in which they
were used to generate revenue.
Expenses
— Expenses are costs and a
decrease to equity caused by day-to-day
activities.
External Users
— People or organizations
outside the business, such as suppliers,
banks and external accountants that use the
financial information of the business.
F
Financial Accounting
—The process of
recordkeeping for the business and preparing
the financial statements.
Financing Activities
— A section on
the cash flow statement that shows cash
movement within a business based on
changes to long-term debt or equity.
First-In, First-Out (FIFO) Method
—The
first-in, first-out (FIFO) method is used
when a business assumes that the first items
received in inventory are also the first items
moved out of inventory.
Fiscal Year
— A one year time frame for
preparing financial statements.The fiscal year
is not necessarily the same as the calendar
year.
Fraud
— Any illegal intentional act of
deception that results in a financial benefit
or gain. It may not always be easy to
identify because the intention is to hide
the fraudulent act within normal business
activities.
Freight-In
— Shipping costs paid on goods
purchased FOB shipping point are recorded
in the freight-in account.
Freight-Out
— Shipping costs paid on
goods sold FOB destination are recorded in
the freight-out account.
Function
— A classification method used
to prepare the income statement based on
the relatability of particular revenues and
expenses.
G
Gain
— An increase in the value of long-
term assets.
General Journal
— A book of original entry
used to record transactions.The journal lists
all the transactions of the business in one
place and in chronological order. It is used to
record any entry that does not belong in one
of the special journals.
General Ledger
— A book used to record
and organize all the accounts and balances of
the business.
General Partnership
— A partnership in
which all partners are subject to unlimited
liability. All partners are considered to be
general partners.
