Glossary of Terms
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- Partnership:
- A business owned by two or more people.
- Percentage of net sales method:
- A method of estimating uncollectible accounts based on the assumption that a predictable portion of sales will not be collected.
- Period costs:
- Operating costs for services consumed during the accounting period that cannot be inventoried.
- Periodic inventory system:
- A system for determining the cost of goods sold by deducting the ending inventory (based on a physical count of the inventory) from the beginning inventory plus total purchases over the period.
- Periodicity:
- The recognition that net income for any period less than the life of the business, although tentative, is still a useful estimate of net income for that period.
- Permanent accounts:
- Balance sheet accounts; accounts whose balances can extend past the end of an accounting period. Also called real accounts.
- Perpetual inventory system:
- A system for determining the cost of goods sold by keeping continuous records of the physical inventory as goods are bought and sold.
- Petty cash fund:
- A fund established by a business for making small payments of cash.
- Petty cash voucher:
- A form signed by each person who receives a cash payment from a business, listing the date, amount, and purpose of the expenditure.
- Physical inventory:
- An actual count of all merchandise on hand at the end of an accounting period.
- Planning:
- A business owned by two or more people.
- Post-closing trial balance:
- A trial balance prepared at the end of the accounting period after all adjusting and closing entries have been posted; a final check on the balance of the ledger.
- Posting:
- The process of transferring journal entry information from the journal to the ledger.
- Practical capacity:
- Theoretical capacity reduced by normal and expected work stoppages.
- Prepaid expenses:
- Expenses paid in advance that do not expire during the current accounting period, an asset account.
- Proceeds from discounting:
- The amount received by the borrower when a promissory note is discounted; proceeds = maturity value – discount.
- Product costs:
- The direct materials, direct labor, and factory overhead costs that are incurred in the manufacturing process and that can be inventoried.
- Professional ethics:
- A code of conduct that applies to the practice of a profession.
- Profit:
- The increase in owner's equity that results from business operations.
- Profitability:
- The ability to earn enough income to attract and hold investment capital.
- Profit margin:
- A measure of profitability; the percentage of each sales dollar that results in net income; net income divided by net sales.
- Program:
- The set of instructions and steps that bring about the wanted results in a computerized data processing system.
- Programmer:
- The person who writes instructions for a computer.
- Promissory note:
- An unconditional promise to pay a definite sum of money on demand or at a future date.
- Property, plant, and equipment:
- Tangible assets of a long-term nature that are used in the continuing operation of a business. Also called operating assets, fixed assets, tangible assets, or long-lived assets.
- Protest fee:
- The charge made by a bank for preparing and mailing a notice of protest.
- Public accounting:
- The field of accounting that offers auditing, tax, and management consultant services to the public for a fee.
- Purchase order:
- A form prepared by a company’s purchasing department and sent up to a vendor that describes the items ordered; their expected price,, terms, and shipping date; and other shipping instructions.
- Purchase requisition:
- A formal written request for a purchase, prepared by a department in the organization and sent to its purchasing department.
- Purchases:
- A temporary account used to accumulate the total cost of all merchandise counting period.
- Purchases discounts:
- Allowances made for prompt payment for merchandise purchased for resale; the Purchases Discounts account is a contra-purchases account.
- Purchases journal:
- A single-column or multicolumn special-purpose journal used to record all purchases on credit.
- Purchases Returns and Allowances:
- The account used to accumulate cash refunds and other allowances made by suppliers on merchandise originally purchased for resale; a contra-purchases account.