Glossary for Business, Law & Procedures Exams for Contractor Licensing
An Account can be defined as a group of transactions that have something in common.
An Account payable is money owed by a company to its creditors or suppliers.
An Accounts Receivable is money owed to a company by its debtors or customers.
Accrual Method of Accounting
In Accrual accounting, revenue is recorded when earned, and expenses are recorded when consumed, not when paid.
Accumulated depreciation is the total amount of a fixed asset's cost that has been allocated to depreciation expense since the asset was put into service.
Adjusted Depreciation Base
Adjusted Depreciation Base is the current value minus the declining balance depreciation of last year.
An Asset is anything the business uses for its operations, regardless of whether it has been paid in full or not. If a company uses a pick-up truck which it still owes entirely to the bank, it is still considered an asset.
A bad debt is a debt that cannot be recovered.
Billing date is the date when the invoice is officially generated.
The Break-Even Point is when a company's revenue equals its expenses, there is no profit and no loss.
A budget is an estimate of income and expenditures for a set period of time.
A Cash Discount is a deduction allowed by the seller of goods or by the provider of services in order to motivate the customer to pay within a specified time.
Cash Method of Accounting
In Cash Accounting, revenue is recorded when cash is received from customers, and expenses are recorded when cash is paid to suppliers and employees.
Completed Contract Method
Completed Contract is an accounting method in which revenue and profit are recognized after the project has been completed.
A current asset is one which can be AND is expected to be converted into cash within 12 months during the regular course of business.
A Current Liability is an amount due to a creditor which must be paid within 12 months within the regular course of business.
Declining-Balance Method is a depreciation technique where a constant percentage is applied to the book value of an asset.
Depreciable Base is used to describe the value that is divided by the service life of the asset to determine the annual depreciation expense under the straight-line method. The depreciable base is the value of the asset to be written off over time.
A Depreciation is the means through which a company writes off the loss it experiences through the wearing down of its assets. Methods of calculating depreciation include straight-line and declining-balance.
Financial Ratios are used to evaluate different aspects of the condition of a company. Some examples of typical ratios are working-capital ratio, quick-assets ratio, and debt-to-equity ratio.
Financial Statements are written records that convey the financial activities and conditions of a business. Examples of Financial statements are the balance sheet, the profit and loss statement or income statement, and the statement cash flows.
A fixed asset is one that cannot and is not expected to be converted into cash within 12 months during the regular course of business.
Incentive Discounts is a percentage that is discounted from an invoice when paid within a specific number of days.
Job Costs Accounting
Job costs accounting is the process of assigning the costs incurred on a specific job.
A liability is an obligation which a company has, which can be reported on its balance sheet. An example of a liability account is accounts payable.
Modified Accelerated Cost Recovery System (MACRS)
The modified accelerated cost recovery system (MACRS) is a depreciation system that allows the capitalized cost basis of assets to be recovered over a specified life of the asset by annual deductions for value depreciation.
Net Working Capital
Net Working Capital is the aggregate amount of all current assets and current liabilities. It is used to measure the short-term liquidity of a business.
An Operating Cycle is the average period of time required for a business to make an initial outlay of cash to produce goods, sell the goods, and receive cash from customers in exchange for the goods.
Overhead expenses are those required to run a business, but which cannot be directly attributed to any specific business activity, product, or service.
Owner's Equity represents the owner's investment in the business minus withdrawal plus net income since the business began.
Percentage Method this method works for any number of withholding allowances the employee claims and any amount of wages.
Percentage of Completion
Percentage of Completion is an accounting method that designates income and expenses for the portion of work which has been completed on a project.
Petty Cash is an accessible store of money kept by an organization for expenditure on small items.
Salvage Value is the estimated resale value of an asset at the end of its useful life. It is subtracted from the cost of a fixed asset to determine the amount of the asset cost that will be depreciated.
Source Documents are the original record containing the details to substantiate a transaction entered in an accounting system. Examples of Source Documents would be invoices and receipts.
Statement of Cash Flows
A Statement of Cash Flows usually shows how the net profits of business have been used, for example, distribution to owners, payment of liabilities, purchasing new assets.
Straight-Line Depreciation is the default method used to gradually reduce the carrying amount of a fixed asset over its useful life.
Useful life is the estimated lifespan of a depreciable fixed asset, during which it can be expected to contribute to company operations.
Wage Bracket Method
Wage bracket withholding tables are used to calculate the amount of income that the employer must withhold from each employee's paycheck.
Wage Range is the range of pay established by employers to pay to their employees who are performing a particular job or function.
Withholding allowance refers to an exemption that reduces how much income tax an employer deducts from an employee's paycheck.