Accounts receivable: An asset created by selling products or services on credit. Amounts due
from customers for credit sales.
Accounts receivable method: A method of estimating bad debts using balance sheet relations.
Also known as Balance Sheet method.
Classified balance sheet: A balance sheet that presents the assets and liabilities in relevant
Closing entries: Journal entries recorded at the end of each accounting period that transfer the
end-of-period balances in revenue, expense, and with
Cash discount: A reduction in the price of merchandise that is granted by a seller to a purchaser
in exchange for the purchaser paying within a specified period of time called the discount period.
Classified, multiple-step income statement: An income stat
Accounting equation: A description of the relationship between a company's assets, liabilities,
and equity; expressed as Assets = Liabilities + Owner's Equity; also called the balance sheet
Accounts payable: A liability created by buying goods o
Account form balance sheet: A balance sheet that lists assets on the left and liabilities and
owner's equity on the right side of balance sheet.
Accounting period: The length of time covered by financial statements and other reports; also
Acid-test ratio: A ratio used to assess a company's ability to cover its current debts with existing
assets calculated as quick assets (cash, short term investments, and receivables) divided by
current liabilities; also called quick ratio.
Account: A place or location within an accounting system in which the increases and decreases
in a specific asset, liability, or equity are recorded and stored.
Account balance: The difference between the increases (including the beginning balance) and
Average cost method: See for weighted average inventory costing.
Conservatism: A shortened reference to the conservatism principle.
Conservatism principle: The accounting principle that guides accountants to select the less
optimistic estimate when two es
Accounting: An information system that identifies, measures, records and communicates
relevant, reliable, and comparable information about an organization's economic activities.
Audit: A check of an organization's accounting systems and records.
Accounting Information System: The people, records, methods, and equipment that collect and
process data from transactions and events, organize them in useful forms, and communicate
results to decision makers.
Accounts Payable Ledger: A subsidiary ledger