GAAP: See generally accepted accounting principles gains: Increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances from revenues or investments by owners. general journal entry: The recording made in a general journal involving the date the transaction occurred the name of the account that is debited and the name of the account credited and the amount credited general journal: A chronological record of original entry that requires both the account being debited an the account being credited to be listed along with the respective amounts general ledger: The element of the accounting system that contains the balance sheet and income statement accounts used for recording transactions. Trial balances are prepared from the general ledger. generally accepted accounting principles (GAAP): the combination of basic accounting that makes up a framework of guidelines for financial accounting going-concern assumption: See continuity assumption. goodwill: the excess of the purchase price of a business over the fair values of the acquired business's net assets. EX: A company buys a business for 500,000, but the fair value of the net assets is only 300,000. The difference is goodwill gross margin: Net sales less cost of goods sold. EX: Net sales are 400,000, while the cost of goods sold is 250,000. The gross margin is 150,000. gross profit: See gross margin gross wages: The total number of hours worked during a period multiplied by he hourly rate. held-to-maturity securities: Investments in debt securities that management intends and has the ability to hold until maturity historical cost: The cost used to record the activities and transactions of a item and provides and objective basis for valuation IFRS: See internal financial reporting standards impairment: A decrease in the value of a long-term asset to and amount that is less than the amount show under the cost principle. improvements: Expenditures that increase the productive life, increase operational efficiency, or ex[and the capacity of an asset. Improvements are increases in assets EX: A company installs a new engine in a truck that will add at least four years to the life of the truck and will increase the mile per gallon income from operation: Gross profit less operating expenses; represents the amount of income before non-operating items. EX: Gains and loses on the sale of assets, interest revenues, and interest expense. income statement: Also called the profit and loss statement of the statement of operations, it is the financial statement that shows revenues earned during a period of time, the expenses incurred to produce that revenue, and income or loss for that same period. income summary account: Account used to close out(bring down to zero) the temporary accounts and to transfer net income or net loss to the retained earnings account. income tax expense: An expense a company recognizes in an accounting period for the government tax related to its earnings. indenture: The contract of a bond or an agreement of a bond that spells out its provisions and features. insurance expense: The amount of insurance that was incurred (expired) during the period. The amount of insurance premiums that have not yet expired should be reported in the current prepaid insurance asset account. intangible assets: Assets that carry certain rights or privileges but have no physical substance EX: Copyrights, franchises, trademarks, and patents interest earned: Also called interest revenues or interest income, this interest earned by the company on investments in such things as savings accounts, CDs, notes, and bonds interest expense: Expense for the cost of borrowed money of other credit.. Under GAAP, the amount of interest expense on the income statement is the cost of the money that as used during the period covered by the income statement, not necessarily the amount of interest paid during that period of time. interest income: See interest earned. interest payable: Interest owed to banks and other entities from which the company has borrowed money. interest receivable: interest owed to the company from entities to which it has extended credit. internal auditors: Employees who provide information regarding the company's operations and proper functioning of its internal controls. internal controls: Processes implemented to help ensure that key objectives are met, including the objectives of reliable financial reporting, effective and efficient operations, and compliance with laws and regulations. Internal Revenue Code (IRC): US law that governs the taxing of income and the collection of those taxes. Internal Revenue Service (IRS): A bureau of the US Department of the Treasury responsible for collecting taxed and the interpretation and enforcement of the Internal Revenue Code international financial reporting standards (IFRS0: The accounting and reporting standard developed by the International Accounting Standards BOard. IFRS are used business entites in most countries. inventory valuation: The dollar value placeds on the goods(merchandise, raw materials, work in process, and finished goods) in a company's inventory. The general rule is that inventory is recorded at cost when it is acquired. However, under certain circumstances, the cost could be replaced by a lower amount. A company must select a cost flow assumption to value its inventory, such as FIFO or LIFO. Inventory valuation also affects the cost for goods sold among for a period. inventory: Sock of goods available for sale, the merchandise or stock tat a sore or company has on hand, or in the case of a manufacturer, raw materials, work in process, and finished goods. investments: Socks and bonds owned by the business, land held for future use or speculative purposes and other marketable securities set aside in special funds ( e.g., pension or plant expansion funds). invoice: A bill of charge prepared and issued by a seller of merchandise or by the provider of services. IRS: See Internal revenue Services journal entry: The recording of a transaction in chronological order with debits and credits to appropriate accounts. journal: The original book of entry for transactions. EX: General journal, sale journal, purchases journal and payroll journal. land improvements: Any long-term asset in which the cost is that of the constructer improvements to the land. EX: Driveways, walkways, lighting, and parking lots land: A long-term asset in which the account reports the cost of the real property excluding the cost of any constructed asset (building and other improvements) on the property. Land is not depreciated last in, first out (LIFO): A method of keeping track of inventory costs that assumes the most recently acquired units are sold first. lease: An agreement to pay rent to the lessor for a stated period of time leasehold improvements: Additions or changes to a rented building that are made by the tenant. The tenant will record the cost of these changes in the long-term asset account called "leasehold improvements." Lese hold improvements are depreciated over the remaining life of the lease. ledger: A collection of accounts. lessee: The renter. lessor: The entity owning an asset and receiving rent from another entity (the lessee). liabilities: Probable future sacrifices of economic eliefs arising from present obligations of a particular entity to transfer assets of provide services to other entities in the future as a result of past transactions or events. Examples include various financial obligations, amounts owed to lenders, suppliers, and others. Liability account names often include the word payable. Liabilities can also include amount received in advance for a future ale or for a future service to be rendered, and in those cases the liability is often called deferred revenue. lien: A claim on as asset that is pledged as collateral. LIFO: See last in, first out liquidity: The characteristic of an asset that can be quickly converted to cash without loss of value. long-lived assets: See long-term assets long-term assets: Assets with an expected useful life of a year or more long-term liabilities: Liabilities that will not be satisfied whithin one year losses: Decreases in entity (net assets) resulting in from peripheral or incidental transactions of an entity and from all other transactions, events, and circumstances affecting the entity during a period, except those that result from expenses or distributions to owners. lower of cost or market: An accounting rule that requires inventory to be listed on the balance sheet at the lower of its cost or replacement value. management's discussion and analysis: A section of Form 10-k that contains information from management about the corporation's financial condition and operations. market value: The number of common shares outstanding multiplied by the price per share at which the stock is currently trading on a public stock exchange. marketable securities: Safe havens involving the temporary use of excess cash to earn interest or dividends until the cash is needed; also called short-term investments. matching principle: The principle that requires a company to match expenses with related revenues to report a company's net income or net loss profitability during a period. merchandise inventory: Good purchased to resell. merchandiser: A depreciation assumption that assumes that in the year an asset is acquired or disposed, transaction occurred in the middle of the year. merchandiser: A company that sells merchandise; EX: Sears, Home Depot, ad Walmart mid-month convention: A depreciation assumption that assumes that in the month as asset is acquired or disposed, the transaction occurred in the middle of the month. mid-year convention: A depreciation assumption that assumes that in the year an asset is acquired or disposed the transaction occurred in the middle of the year. monetary unit assumption: an accounting assumption that states that the US dollar is assumed to be constant over time and that items that cannot be expressed in dollars do not appear on the financial statements. multiple-step income statement: An income statement that has several steps (subtractions) to arrive at net income and show gross profit. .