A – Accounting Glossary
Accounting reform is change to accounting rules that goes beyond the enforcement of standard accounting practices and the elimination of “creative accounting”. It is advocated by those who consider the present standards and practices of the profession wholly inadequate to the task of measuring and reporting the activity, success, and failure of modern enterprise, including government. “Accounting”, says Baruch Lev, a notable proponent of such reform, “is about accountability”. He notes that the present regime of accounting rules dates back about 500 years to Renaissance Italian practices.
Accounting software is computer software that records and processes accounting transactions such as accounts payable, accounts receivable, payroll and trial balance. It may be developed inhouse by the company or organization using it, may be purchased from a third party, or may be a combination of a third-party application software package with local modifications. It varies greatly in its complexity and cost.
Accounts payable is one of a series of accounting transactions dealing with the paying of suppliers to which one owes money for goods and services. The average household performs this task by writing checks each month to such suppliers as the electric company, telephone company, cable TV or satellite dish service, the local newspaper, and so on.
Accounts receivable is one of a series of accounting transactions dealing with the billing of customers which owe money to a person, company or organization for goods and services that have been provided to the customer. This is typically done in a one person organization by writing an invoice and mailing or delivering it to each customer.
Accrual basis accounting
Accrual-basis accounting records financial events based on events that change your net worth (the amount owed to you less the amount you owe others). Standard practice is to record expenses with the incomes they are associated with. For example, your landlord would record an income event on the day your rent comes due (you owe it to him). He records an expense event when the fee owed to the rental agent comes due for your apartment that month (he owes it to the agent). The details of the actual cash flows and their timing are tracked by bookkeeping.
Amortization is the spreading of expenses over future time periods of an intangible balance sheet item such as a Leasing (mortgage) or goodwill.
In finance, an annuity is a series of fixed payments, which might be over a fixed number of years, over the lifetime of an individual, or both. The most common use of annuities is to provide a pension for people in retirement.
In business and accounting an asset is anything owned, whether in possession or by right to take possession, by a person or a group acting together, e.g. a company, the value of which can be expressed in monetary terms. Asset is listed on the balance sheet. It has a normal balance of debit. Assets may be classified in many ways. The principal distinction normally made for business purposes is between: fixed assets and current assets. Other business subdivisions include intangible assets, that is, those assets which, though not visible, add to the earning power of the business, e.g. goodwill, patents, copyrights, etc. (also called invisible assets); liquid assets, which are a subdivision of current assets and also categories labelled trade investments,quoted investments, etc.
Assurance has been defined by the American Institute of Certified Public Accountants (AICPA) as ‘Independent Professional Services that improve information quality or it context’. Such services are very broad and could include assessments of internet security and quality of health facilities.
Audit is the examination of records and reports of a company, in order to check that what is provided is relevant, and closest to the reality. That is to say, all assets and liabilities are properly recorded in the balance sheet, and, all profits and losses are properly assessed. This assessment is done through 2 methods, by assessing internal control procedures and by checking the consistency of items in the books.