Glossary
441
Generally Accepted Accounting
Principles (GAAP)
— Standards created by
the accounting profession, which provide
guidance on how financial information
should be reported.
Going Concern Assumption
—The
going concern assumption assumes that a
business will continue to operate into the
foreseeablefuture.
Gross Pay
—The amount of wages or pay
that an employee earns.
Gross Profit
—The difference between
service revenue and cost of sales is called
gross profit.
Gross Profit Margin
—The ratio of gross
profit to sales revenue.
Gross Profit Method
—The gross profit
method uses a company’s gross profit figure
to estimate the value of inventory. More
specifically, a company analyzes the gross
profit numbers of prior years to come up with
a current gross profit number to apply to
estimation figures.
H
Horizontal Analysis
— Analysing financial
information from year to year.
I
Imprest Bank Account
—This is a separate
bank account from the main account of
the business. It is used specifically for one
function such as payroll.
Income Statement
— Atemporary record
to record transactions relating to revenue and
expenses. It is made to determine the change
in net worth or equity over a specific period
of time.
Income Summary
— A temporary holding
account to close the revenue and expense
accounts.
Internal Users
— People who own the
business and/or work in the business.
International Financial Reporting
Standards (IFRS)
— Standards created by
International Accounting Standards Board
(IASB), which provide guidance on how
financial information should be reported.
Inventory
— It is a collection of physical
goods that a company has purchased or
manufactured to sell to its customers.
Inventory Days on Hand
— A calculation
of how many days inventory will last given
the current rate of sales.
Inventory Turnover Ratio
—The inventory
turnover ratio estimates how many times a
year a company is buying inventory.
Inventory Valuation Methods
—There are
three methods that companies can use, based
on the nature of the goods, to determine how
inventory costs are handled.These are called
inventory valuation methods because they
will determine the value of inventory on hand
at any given time.
Investing Activities
— A section on
the cash flow statement that shows cash
movement within a business based on
investing in long-term assets.
Invoice
—The invoice includes the details
of the items sold or services rendered, the
agreed-upon price, and the due date.
