For G2/G3 Principles of Accounts (Singapore)
GLOSSARY
Accounting Jargons Simplified To Layman Terms
A
the total depreciation of a non-
current asset to date. Appears as a deduction from the cost of the non- current asset account (to give net book value) in the non-current asset section of the statement of financial position.
retained earnings with a negative balance resulting from continued losses over the years.
an estimated amount of trade
receivables who might not be able to pay the amount due and so will reduce the value of trade receivables in the statement of financial position to reflect the realistic amount to be collected.
amounts deposited into a business’s bank account but which have not yet been recorded by the bank as credit entries, and not reflected in the bank statement.
another word for mathematical, used in reference to check that the total debits and credits agree in a trial balance.
resources a business owns or controls that are expected to provide future benefit.
approvals provided by designated personnel for all payments.
a method for providing financial data so that owners of the business and others interested in it would have useful information in order to help them assess the business’ performance for decision-making.
a 4-step process that begins when transactions are identified and recorded, and the cycle ends when adjusted values are closed to income summary after financial statements are prepared.
the business and the owner are two separate entities with all transactions recorded from the business’ viewpoint.
a relationship between the three elements that are a feature of all businesses, i.e. assets, liabilities and equity. The equation is: Assets = Equity + Liabilities.
the basic rules that are to be applied by all who prepare accounting records; also known as accounting concepts.
income is recorded in the financial period it is earned, regardless of when money is received. Expenses are recorded in the financial period they are incurred, regardless of when payment is made.
B
calculated net amount in an account and stating it as a debit or credit balance at the period’s end and start of the next.
payments automatically taken from a checking account at regular intervals, like monthly. These charges provide income to the bank for maintaining and operating the account.
money owing to the bank by an entity when the total withdrawals exceed the total deposits of funds in the entity’s bank account.
when a person or firm has legally declared that he/she or it is unable to repay debts.
the bank’s record of an entity’s account with the bank.
process by which differences between the business’ view of its bank account and the bank’s view of the business’ bank account are harmonized.
STATEMENT
a document prepared by businesses at regular intervals (say monthly) to check that their bank records agree with those provided by the bank.
c
the investment in the business made by owner(s) of the business. Known as capital for sole proprietors and share capital for private limited companies.
money spent to buy non-current assets and to get them ready for use, or to improve the non-current assets’ usage. The benefits derived from this expenditure can last several financial years.
a reduction in the amount paid by credit customers or amount paid to credit suppliers, when amounts owing are settled earlier than the agreed time limit.
where cash is received from the customer when goods or services are sold.
sales and purchase of goods and services that can only be settled by cash, bank transfer or cheque
financial activities involving the immediate use of money.
the business has issued a cheque to its supplier but the supplier has yet to present the cheque to the bank for payment.
the process of reducing the balance of an account to zero and transferring the balance to an appropriate account like income summary or capital.
goods unsold at the end of a financial year.
form of business entity owned by 50 or less owners (known as shareholders) where each shareholder buys shares to contribute capital to the business.
accounting processes or treatments that are carried out in the same manner year after year.
Values relevant to buying inventory and getting it ready for sale in a trading business.
the cost price of goods sold during a financial year.
the right-hand side of an account or the amount recorded in the credit column of a columnar account.
customers’ track records regarding their abilities to make payments promptly.
the type of account where the normal or positive balance is on the right-hand column of a columnar account or CR is written after the balance amount.
source document that reduces the amount owed due to previous overcharging or return of goods.
details regarding when payments for amounts owing (due to credit sales or purchases) must be made and any discounts given for early payments.
financial activities when the payment or receipt of money is delayed.
the automatic transfer of funds into a business’ bank account by the business’ customers.
determination of a customer’s ability to repay what is owing and whether the customer should be granted credit.
resources that are cash or can be quickly turned into cash and are of benefit to the business for less than one accounting period / financial year.
amounts owing by a business to external parties that must be settled within one accounting period / financial year.
the principal amount of a long-term bank loan that needs to be repaid within one financial year.
current assets in relation to current liabilities. The ratio is sometimes called the working capital ratio, and has an acceptable norm of 2:1.
how cash and cheques are secured in a locked storage.
government tax paid for importing goods from another country.
motivations and behaviours which influence customers’ purchasing decisions.
D
the left-hand side of an account or the amount recorded in the debit column of a columnar account.