P – Accounting Glossary

glossary-smartiesAccounting definitions.

Source: Wikipedia.org

Payroll
Payroll is one of a series of accounting transactions dealing with the process of paying employees for services rendered, after processing of the various requirements for withholding of money from the employee for payment of payroll taxes, insurance premiums, employee benefits, garnishments and other deductions.

Petty cash
Businesses often need small amounts of cash known as petty cash for expenditures where it is not practical to make the disbursement by check. The most common way of accounting for these expenditures is to use the imprest method. The initial fund would be created by issuing a check for the desired amount. Usually $100 would be sufficient for most small business needs. The entry for this initial fund would be to debit Petty Cash and credit cash.

Preferred stock
Preferred stock, also known as Preferred shares, are shares of stock that carry additional rights above and beyond those conferred by common stock. eg a dividend amount that never changes, if the dividend is paid at all. The dividend is usually specified as a percentage of the initial investment and/or a stock symbol letter, such as Pacific Gas & Electric 6% Preferred A.

Price earnings ratio
Calculated as price per share divided by earnings per share. The price per share (numerator) is the market price of a single share of the stock. The Earnings per share (denominator) is the Net Income of the company for the most recent 12 month period, divided by number of shares outstanding.

Pro-forma amount
Many companies report pro forma earnings, in addition to normal earnings calculated under the Generally Accepted Accounting Principles (“GAAP”), in their quarterly and yearly financial reports. The pro forma accounting is a statement of the company’s financial activities while excluding “unusual and nonrecurring transactions” when stating how much money the company actually made. Expenses often excluded from pro forma results include company restructuring costs, a decline in the value of the company’s investments, or other accounting charges, such as adjusting the current balance sheet to fix faulty accounting practices in previous years.