Glossary for Business, Law & Procedures Exams for Contractor Licensing
- Account
- An Account can be defined as a group of transactions that have something in common.
- Account Payable
- An Account payable is money owed by a company to its creditors or suppliers.
- Account Receivable
- 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
- 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.
- Asset
- 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.
- Bad Debts
- A bad debt is a debt that cannot be recovered.
- Billing Date
- Billing date is the date when the invoice is officially generated.
- Break-Even Point
- The Break-Even Point is when a company's revenue equals its expenses, there is no profit and no loss.
- Budget
- A budget is an estimate of income and expenditures for a set period of time.
- Cash Discount
- 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.
- Current Asset
- 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.
- Current Liability
- 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 Depreciation
- Declining-Balance Method is a depreciation technique where a constant percentage is applied to the book value of an asset.
- Depreciation Base
- 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.
- Depreciation
- 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
- 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
- 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.
- Fixed Asset
- 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
- 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.
- Liability
- 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.
- Operating Cycle
- 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
- 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
- Owner's Equity represents the owner's investment in the business minus withdrawal plus net income since the business began.
- Percentage Method
- 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
- Petty Cash is an accessible store of money kept by an organization for expenditure on small items.
- Salvage Value
- 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
- 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
- Straight-Line Depreciation is the default method used to gradually reduce the carrying amount of a fixed asset over its useful life.
- 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
- 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
- Withholding allowance refers to an exemption that reduces how much income tax an employer deducts from an employee's paycheck.