Glossary
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Specific Identification Method
—The
specific identification method is used when
a business sells goods which are not identical
or are customized in some way.This method
accurately tracks the costs and value of
inventory, but it can be costly to apply.
Statement of Owner’s Equity
—The
Statement of Owner’s Equity is the formal
statement to show how owner’s equity
changed during the accounting period.
Straight-Line Depreciation
— Straight-
line depreciation is a method to allocate the
cost of the asset evenly over the life of the
asset.
Subsidiary Ledger (Subledger)
— A
subsidiary ledger is used to provide details
that are not kept in the general ledger
because too much information will clutter up
the general ledger accounts.
T
T-Account
—T-accounts are used to track
the increases and decreases in the value of
assets, liabilities, net worth or equity, revenue
and expenses.
Temporary Accounts
— Revenue and
expenses are considered to be temporary
accounts because they are brought back to a
zero balance at the end of each period.This
is done so that a new income statement can
be prepared for the next period with a fresh
start.
Time Period Concept
— Accounting takes
place over specific time periods known as
fiscal periods.These fiscal periods are of equal
length, and are used when measuring the
financial progress of a business.
Timeliness
— Information is timely if there
is no delay in reporting crucial information.
Transaction
— A transaction is a trade
or exchange with someone else in order to
receive something of value.
Trial Balance
— A list of all accounts in the
general ledger and their balances at a specific
date.
U
Unadjusted Trial Balance
—The original
trial balance is called the unadjusted trial
balance because these values represent
account balances before adjustments are
made.
Understandability
—The financial
information can be reasonably understood by
its users if the users have knowledge of the
business and a basic knowledge of accounting.
Unearned Revenue
— Unearned revenue
is an obligation the business has to provide
products or service to a customer. It is used
when a customer prepays the business for
services or products.
Unlimited Liability
— If the business
is unable to pay its debts, creditors of the
business can force the owner to sell his or her
personal assets to pay the business debts.
Useful Life
—The length of time the asset
can be used is called the useful life.
V
Verifiability
— Verifiability is a component
of reliability.The proof of a transaction would
be some form of paperwork that relates to the
transaction.This proof verifies the transaction.
