Glossary of Accounting Terms................................
Absorption costing A method of costing in which all fixed and
variable production costs are charged to
products or services using an allocation base.
Account An explanation or report in financial terms about
the transactions of an organization.
Accountability The process of satisfying stakeholders in the
organization that managers have acted in the
best interests of the stakeholders, a result of the
stewardship function of managers, which takes
place through accounting.
Accounting A collection of systems and processes used to
record, report and interpret business
transactions.
Accounting equation The representation of the double-entry system of
accounting such that assets are equal to liabilities
plus capital.
Accounting period The period of time for which financial statements
are produced – see also financial year.
Accounting rate of return
(ARR)
A method of investment appraisal that measures
the profit generated as a percentage of the
investment – see return on investment.Accounting system A set of accounts that summarize the
transactions of a business that have been
recorded on source documents.
Accounts ‘Buckets’ within the ledger, part of the
accounting system. Each account contains
similar transactions (line items) that are used for
the production of financial statements. Or
commonly used as an abbreviation for financial
statements.
Accrual An expense for profit purposes even though no
payment has been made.