Glossary
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Reliability
— Reliability means that
information is free from significant error and
bias.
Representational Faithfulness
— A piece
of reliability which means that transactions
must be presented as their true economic
substance rather than their legal form.
Residual Value
— Residual value is the
estimated value of the asset at the end of its
useful life.
Retail Method
— An inventory estimation
method that requires two things: the value of
sales at retail prices and the company’s cost of
goods sold section on the income statement.
Retained Earnings
—The cumulative net
income of a corporation, less any amounts
paid out as dividends.
Return on Equity (ROE)
— A measure of
the return owners are receiving based on their
investment in the business.
Revenue
— Revenue is an increase to net
worth caused by providing goods or services
in exchange for an asset, usually cash.
Revenue Recognition
— Revenue
recognition states that revenue can only be
recorded (recognized) when goods are sold or
when services are performed.
Rules-Based Accounting
—The accounting
standards are stated as a list of specific,
detailed rules that must be followed when
preparing financial information.
S
Sales Allowances
— Sales allowances occur
when the customer decides to keep such
undesirable products at a reduced price.
Sales Discounts
—When selling products
or services, it is common to offer sales
discounts to customers for early payment.
Sales Journal
— A sales journal is used to
record all sales on account.
Sales Returns
— Sales returns occur when
undesirable products are returned to the
seller.
Sales Returns and Allowances
— A
contra-revenue account used to track sales
allowances and returns so as to not adjust
sales revenue.
Sales Revenue
— A business that sells
products to its customers.
Service Revenue
— A business that
provides services to its customers.
Share Capital
— A section of a corporation’s
balance sheet showing equity raised by selling
shares.
Shareholder
— An owner of a corporation
through ownership of shares.
Shareholders’ Equity
— Equity is the net
worth of a business, after all assets have been
sold and all liabilities have been paid. In a
corporation, it is referred to as shareholders’
equity.
Shares
— Each share provides partial
ownership of a corporation.
Sole Proprietorship
— A business owned
and generally operated by one owner.
Source Documents
— Provide evidence of
a transactions that get recorded in journal
entries, which are then posted to the ledger
accounts.
Special Journal
— A separate book used to
maintain transactions that occur regularly.
