Accounting For Dummies, 6th Edition

Appendix

Glossary: Slashing through the Accounting Jargon Jungle

ABC:

The acronym for activity-based costing, which is a cost allocation scheme that allocates the cost of support functions in an organization (such as maintenance) based on the units of activity of the support function that are used by other departments and processes in the business.

accounting:

The methods and procedures for identifying, analyzing, recording, accumulating, and storing information and data about the activities of an entity that have financial results and for preparing summary reports of these activities for managers and for those entitled to receive financial reports about the entity. A business’s managers, investors, and lenders depend on accounting reports called financial statements to make informed decisions. Accounting also encompasses preparing tax returns that must be filed with government tax authorities by the entity and facilitating day-to-day operating functions.

accounting entity:

The enterprise or organized activity being accounted for. It can be a profit-motivated business entity or a not-for-profit entity. The law enables many types of legal entities, which are treated as separate persons or creatures in the eyes of the law.

accounting equation:

An equation that summarizes the balance, or equality, of an entity’s assets and the sources of its assets, which generally have claims against the assets of the entity. It can be expressed in more than one way. One popular version is

        Assets ...