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Accounting Terminology: A Comprehensive Glossary, Exams of Business Fundamentals

London Institute of Business and Technology (LIBT)Business Fundamentals

A comprehensive glossary of accounting terms and definitions, essential for understanding financial statements and accounting processes. It covers key concepts such as assets, liabilities, equity, revenue, expenses, and various accounting principles like accrual accounting and conservatism. This resource is valuable for students and professionals seeking to enhance their knowledge of accounting terminology and financial reporting standards. It also includes important ratios and financial measures.

Typology: Exams

2024/2025

Available from 05/22/2025

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Accounting Exam 1
Account Balance correct answer Difference between total debits and total credits (including the
beginning balance) for an account.
Accounting correct answer comprehensive system for collecting, analyzing, and communicating
financial information
Accounting Cycle correct answer for a given time period, the cycle of recording accounting data,
adjusting the accounts, preparing the financial statements, and closing the temporary accounts;
when one accounting cycle ends a new one begins
Accounting Event correct answer Economic occurrence that changes a company's assets,
liabilities, or equity
Accounting Period correct answer Time span covered by the financial statements; normally one
year, but may be a quarter, month or some other time interval
Accrual correct answer Accounting recognition of revenue or expense in a period before cash is
exchanged
Accrual Accounting correct answer Accounting system which recognizes revenues when earned
and expenses when incurred regardless of when the related cash is exchanged
Adverse Opinion correct answer Opinion issued by a certified public accountant that means one
or more departures from GAAP in a company's financial statements are so very material the
auditors believe the financial statements do not fairly represent the company's status
Adjusting Entry correct answer Entry that updates account balances prior to preparing financial
statements; a bookkeeping tool. Adjusting entries never affect the Cash account
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Accounting Exam 1 Account Balance correct answer Difference between total debits and total credits (including the beginning balance) for an account. Accounting correct answer comprehensive system for collecting, analyzing, and communicating financial information Accounting Cycle correct answer for a given time period, the cycle of recording accounting data, adjusting the accounts, preparing the financial statements, and closing the temporary accounts; when one accounting cycle ends a new one begins Accounting Event correct answer Economic occurrence that changes a company's assets, liabilities, or equity Accounting Period correct answer Time span covered by the financial statements; normally one year, but may be a quarter, month or some other time interval Accrual correct answer Accounting recognition of revenue or expense in a period before cash is exchanged Accrual Accounting correct answer Accounting system which recognizes revenues when earned and expenses when incurred regardless of when the related cash is exchanged Adverse Opinion correct answer Opinion issued by a certified public accountant that means one or more departures from GAAP in a company's financial statements are so very material the auditors believe the financial statements do not fairly represent the company's status Adjusting Entry correct answer Entry that updates account balances prior to preparing financial statements; a bookkeeping tool. Adjusting entries never affect the Cash account

Allocations correct answer Recognizing expenses by systematically assigning the cost of an asset to periods of use American Institute of CPA's correct answer National association that serves the education and professional interests of member of the public accounting profession; membership is voluntary Annual Reports correct answer Document companies publish to provide information, including financial statements, to stockholders Asset Exchange Transaction correct answer A transaction that decreases one asset and increases another asset; total asset remain unchanged. Asset Source Transaction correct answer A transaction that increases both an asset and a claim on assets ; the three types of asset source transactions are aquisitions from owners (equity), borrowing from creditors (liabilities), or earnings from operations (revenues). Asset Use Transaction correct answer A transaction that decreases both an asset and a claim on assets; 3 types are distributions, liability payments, or expenses Asset correct answer Economic resource used to produce revenue which is expected to provide future benefit to the business Audits correct answer the verifying of facts or procedures Balance Sheet correct answer A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. Books of original entry correct answer A journal in which a transaction is first recorded.

Cost correct answer The amount paid to acquire a resource (asset) or to pay for a resource that has been consumed. Credit correct answer Entry on the right side of an account; increases liability and equity accounts or decreases asset accounts Debt to Asset Ratio correct answer Financial measure of a company's level of risk, calculated as total debt divided by total assets Deferrals correct answer accounting recognition of revenue or expense in a period after cash is exchanged Disclaimer of Audit Opinion correct answer Report on financial statements issued when the auditor is unable to obtain enough information to determine if the statements conform to GAAP; is neither positive nor negative Double Entry Accounting correct answer Accounting system in which each transaction affects at least two accounts and has at least one debit and one credit. Equity correct answer the ownership interest of shareholders in a corporation Expenses correct answer economic sacrifice that is incurred in the process of generating revenue Financial Accounting correct answer Accounting information and analyses prepared for people outside the organization. Financing Activities correct answer activities related to cash inflows and outflows from transactions with owners and creditors who supply funds to operate the firm and return to the owners; dividends paid, borrowing money, etc.

Generally Accepted Accounting Principles correct answer A set of rules used by accountants to prepare financial reports General Ledger correct answer a ledger that contains all accounts needed to prepare financial statements General Journal correct answer All-purpose journal for recording the debits and credits of transactions and events. Historical Cost correct answer This is the idea that we record the value of assets at their purchase (or original cost). Income Statement correct answer a financial document that shows how much money (revenues) came in and how much money (expenses) was paid out Liabilities correct answer Organization's debts and other financial obligations. Liquidity correct answer ability to converted an asset into cash quickly Managerial Accounting correct answer the internal use of accounting statements by managers in planning and directing the organization's activities Matching Concept correct answer A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses. Net Income correct answer the difference between total revenue and total expenses when total revenue is greater Net Loss correct answer The difference between total revenue and total expenses when total expenses are greater

Salvage Value correct answer Estimate of amount to be recovered at the end of an asset's useful life; also called residual value or scrap value. Statement of Change in Stockholder's Equity correct answer statement that summarizes the transactions that affected the owners equity during the accounting period Statement of Cash Flows correct answer Financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing. T-Account correct answer A tool used to learn the double-entry accounting system. It has the appearance of the letter T. The left side is for debit entries and the right side is for credit entries. The account title appears at the top of the T. Temporary Accounts correct answer Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period Unearned Revenue correct answer Liability created when customers pay in advance for products or services; earned when the products or services are later delivered.