Bank statement A summary of all trans-
actions is mailed to the depositor by the
bank each month. (p. 319)
Bond A form of interest-bearing note
used by corporations to borrow on a
long-term basis. (p. 447)
Bond indenture The contract between
a corporation issuing bonds and the
bondholders. (p. 447)
Bonds payable A type of long-term
debt financing with a face amount that
is due in the future with interest that is
normally paid semiannually. (p. 11)
Book inventory The amount of inventory
recorded in the accounting records.
(p. 230)
Book value The cost of a fixed asset
minus accumulated depreciation on the
asset. (p. 407)
Business An organization in which
basic resources (inputs), such as materi-
als and labor, are assembled and
processed to provide goods or services
(outputs) to customers. (p. 4)
Business entity concept A concept of
accounting that limits the economic data
in the accounting system to data related
directly to the activities of a specific
business or entity. (p. 21)
Business information system A system
that collects and processes company
data into information that is distributed
to users. (p. 152)
Business stakeholder A person or entity
who has an interest in the economic
performance of a business. (p. 8)
Callable bonds Bonds that a corpora-
tion reserves the right to redeem before
their maturity. (p. 448)
Capital expenditures The cost of acquir-
ing fixed assets, adding a component,
or replacing a component of fixed as-
sets. (p. 403)
Capital stock Types of stock a corpora-
tion may issue. (p. 11)
Cash Coins, currency (paper money),
checks, money orders, and money on
deposit that is available for unrestricted
withdrawal from banks and other
financial institutions. (p. 315)
Cash basis of accounting A system of
accounting in which only transactions
involving increases or decreases of the
entity’s cash are recorded. (p. 117)
Cash conversion cycle The number of
days’ sales in accounts receivable, plusthe number of days’ sales in inventory,
less the number of days’ sales in ac-
counts payable. (p. 597)
Cash dividend A cash distribution of
earnings by a corporation to its share-
holders. (p. 505)
Cash equivalents Highly liquid invest-
ments that are usually reported with
cash on the balance sheet. (p. 326)
Cash flows from financing activities
The section of the statement of cash
flows that reports cash flows from trans-
actions affecting the equity and debt of
the business. (p. 580)
Cash flows from investing activities
The section of the statement of cash
flows that reports cash flows from trans-
actions affecting investments in noncur-
rent assets. (p. 580)
Cash flows from operating activities
The section of the statement of cash
flows that reports the cash transactions
affecting the determination of net
income. (p. 580)
Cash short and over account An account
used to record the difference between the
amount of cash in a cash register and the
amount of cash that should be on hand
according to the records. (p. 315)
Chart of accounts The list of accounts in
the general ledger. (p. 160)
Classified balance sheet A balance
sheet prepared with various sections,
subsections, and captions that aid in its
interpretation and analysis. (p. 113)
Closing entries The entries necessary
at the end of an accounting period to
transfer the balances of revenue,
expense, and dividend accounts to
retained earnings. (p. 169)
Closing process The process of transfer-
ring the balances of the revenue,
expense, and dividends accounts to
retained earnings in preparation for
the next accounting period. (p. 169)
Common stock The stock outstanding
when a corporation has issued only one
class of stock. (pp. 11, 496)
Common-sized financial statement
A financial statement in which all items
are expressed only in percentages.
(pp. 120, 635)
Comprehensive income All changes in
stockholders’ equity during a period
except those resulting from dividends
and stockholders’ investments. (p. 508)Consignee The retailer carrying an item
for sale (consignment) that is owned by
another retailer (consignor). (p. 233)
Consignment Merchandise that is
owned by a retailer (consignor) that
is being carried for sale by another
retailer (consignee). (p. 233)
Consignor A retailer who allows another
retailer (consignee) to carry and sale its
merchandise (consignment). (p. 233)
Consolidated financial statements
Financial statements resulting from com-
bining parent and subsidiary statements.
(p. 549)
Contingent liability An obligation from
a past transaction that is contingent
upon a future event. An example would
be product warranty payable. (p. 461)
Contract rate The periodic interest to be
paid on the bonds that is identified in
the bond indenture; expressed as a per-
centage of the face amount of the bond.
(p. 451)
Controlling account The account in the
general ledger that summarizes the bal-
ances of the accounts in a subsidiary
ledger. (p. 221)
Convertible bonds Bonds that may be
exchanged for other securities. (p. 447)
Copyright An exclusive right to publish
and sell a literary, artistic, or musical
composition. (p. 413)
Corporation A business organized
under state or federal statutes as a
separate legal entity. (p. 5)
Cost concept A concept of accounting
that determines the amount initially
entered into the accounting records for
purchases. (p. 22)
Cost of capital The cost of financing
operations from both debt and common
stock, expressed as a percentage rate.
(p. 637)
Cost of goods sold The cost of product
sold. (p. 266)
Cost of merchandise sold The cost that
is reported as an expense when mer-
chandise is sold. (p. 212)
Credit memorandum A form used by a
seller to inform the buyer of the amount
the seller proposes to credit to the
account receivable due from the buyer.
(p. 224)
Credit period The amount of time the
buyer is allowed in which to pay the
seller. (p. 223)G-2 Glossary