Glossary
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Owner’sWithdrawals
—The amount of
cash or assets taken by the business owner for
personal use.
P
Partners’ Equity
— Equity is the net worth
of a business, after all assets have been
sold and all liabilities have been paid. In a
partnership, it is referred to as partners’ equity.
Partnership
— A partnership is a business
owned by two or more people called partners.
Periodic Inventory System
— A periodic
inventory system determines the quantity of
inventory on hand only periodically, usually at
the end of the month or year.
Perpetual Inventory System
— A
perpetual inventory system involves recording
all transactions affecting the balance of
inventory on hand, as they occur.This means
that the system updates after every purchase
and sale.
Post-Closing Trial Balance
—The post-
closing trial balance only lists accounts that
have a balance.
Preferred Shares
— Shares of a corporation
that have priority over common shares, but
do not provide voting rights to elect directors
of the corporation.
Prepaid Expense
— A prepaid expense
occurs when you pay cash for an expense
before you use it.
Principles-Based Accounting
—The
principles under the conceptual framework
allow accountants to make appropriate
decisions under different circumstances.
Private Enterprise
— Any business or
organization in which ownership is restricted
to a select group of people.
Profitability
—The ability of a company to
generate profits.
Property, Plant and Equipment
—
Equipment, buildings, land and other similar
assets that provide the business with benefits
for a long period of time are called property,
plant and equipment or long-term assets.
These items are not intended to be sold to
customers.
Purchase Discounts
—The discounts given
by the sellers to encourage customers to make
early payments.
Purchase Returns and Allowances
—
Instead of just crediting the purchases
account, businesses that use a periodic
inventory system track these returns by using
a temporary contra account to purchases
called purchase returns and allowances.
Purchases Journal
—The purchases journal
records all purchases on account.
Q
Quick Ratio
—The quick ratio is similar to
the current ratio, but only counts assets that
can easily be turned into cash.
R
Recognizing
— Recognizing an expense or
revenue simply means recording the expense
or revenue on the income statement.
Relevance
— All information useful for
decision making is present in the financial
statements.
