Account A record of increases and decreases in specific asset, liability, or stockholders’ equity items
Accounting The information system that identifies, records, and communicates the economic events of an organization to interested users.
Accounts payable (creditors’) subsidiary ledger A subsidiary ledger that contains accounts of individual creditors
Accounts receivable (customers’) subsidiary ledger A subsidiary ledger that contains individual customer accounts
Accrual-basis accounting Accounting basis in which transactions that change a company’s financial statements are recorded in the periods in which the events occur
Accrued expenses Expenses incurred but not yet paid in cash or recorded
Accrued revenues Revenues earned but not yet received in cash or recorded
Adjusted trial balance A list of accounts and their balances after all adjustments have been made
Adjusting entries Entries made at the end of an accounting period to ensure that the revenue recognition and matching principles are followed
Administrative expenses Expenses relating to general operating activities such as personnel management, accounting, and store security
American Hotel and Lodging Association (AH&LA) A trade association whose members are mostly hotels and lodging properties in the United States
Application Solutions Providers Companies that provide application solutions directly to the end-users in the industry. The end-users purchase application solutions via the Internet rather than the software
Assets Resources owned by a business.
Balance sheet A financial statement that reports the assets, liabilities, and stockholders’ equity at a specific date.
Basic accounting equation Assets = Liabilities + Stockholders’ Equity.
Bonus Compensation to management personnel and other employees, based on factors such as increased sales or the amount of net income
Bookkeeping A part of accounting that involves only the recording of economic events.
Book value The difference between the cost of a depreciable asset and its related accumulated depreciation
Calendar year An accounting period that extends from January 1 to December 31
Cash-basis accounting Accounting basis in which revenue is recorded when cash is received and an expense is recorded when cash is paid
Cash payments journal A special journal used to record all cash paid
Cash receipts journal A special journal used to record all cash received
Chart of accounts A list of accounts and the account numbers that identify their location in the ledger
Classified balance sheet A balance sheet that contains a number of standard classifications or sections
Closing entries Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders’ equity account, Retained Earnings
Club Managers Association of America (CMAA) A trade association whose members are mostly club managers in the United States
Control account An account in the general ledger that summarizes a subsidiary ledger
Common stock Issued in exchange for the owners’ investment paid in to the corporation
Compound entry A journal entry that involves three or more accounts
Contra asset account An account that is offset against an asset account on the balance sheet
Cost of goods sold The total cost of merchandise sold during the periodComparability Ability to compare accounting information of different companies because they use the same accounting principles
Conceptual framework A coherent system of interrelated objectives and fundamentals that can lead to consistent standards
Conservatism The approach of choosing an accounting method when in doubt that will least likely overstate assets and net income
Consistency Use of the same accounting principles and methods from year to year within a company
Consolidated income statement A combined income statement of all departmental income statements of an entity
Controller The department head of the accounting department who has to work with not only the employees in the accounting and business office, but with all department heads
Corporation A business organized as a separate legal entity under state corporation law having ownership divided into transferable shares of stock.
Correcting entries Entries to correct errors made in recording transactions
Cost principle Accounting principle that assets should be recorded at their historical cost
Credit The right side of an account
Credit memorandum A document issued by a seller to inform a customer that a credit has been made to the customer’s account receivable for a sales return or allowance
Credit terms Conditions specified on a sales invoice as to when and in what amount a cash discount will be offered
Cross-footing The proving of the equality of the totals in a journal
Current assets Cash and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, whichever is longer
Current liabilities Obligations reasonably expected to be paid from existing current assets or through the creation of other current liabilities within the next year or operating cycle, whichever is longer
Current ratio A measure that expresses the relationship of current assets to current liabilities by dividing current assets by current liabilities
Debit The left side of an account
Debit memorandum A document issued by a buyer to inform a seller that a debit has been made to the seller’s account because of unsatisfactory merchandise
Debt to total assets ratio Solvency measure that indicates the percentage of total assets provided by creditors; calculated as total debt divided by total assets
Depreciation The allocation of the cost of an asset to expense over its useful life in a rational and systematic manner
Direct method A method of determining the net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis
Dividend A distribution by a corporation to its stockholders on a pro rata (equal) basis.
Double-entry system A system that records in appropriate accounts the dual effect of each transaction
Earnings per share (EPS) The net income earned by each share of outstanding common stock
Economic entity assumption Accounting assumption that economic events can be identified with a particular unit of accountability
Elements of financial statements Definitions of basic terms used in accounting
Employee earnings record A cumulative record of each employee’s gross earnings, deductions, and net pay during the year
Employee’s Withholding Allowance Certificate (Form W-4) An Internal Revenue Service form on which the employee indicates the number of allowances claimed for withholding federal income taxes
Ethics The standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair.
Executive committee The executive committee is made up of all the department heads of a hotel. This group comes together for meetings to make decisions and ensure all information is relayed correctly
Expenses The cost of assets consumed or services used in the process of earning revenue.
Federal unemployment taxes Taxes imposed on the employer that provide benefits for a limited time period to employees who lose their jobs through no fault of their own
FICA taxes Taxes designed to provide workers with supplemental retirement, employment disability, and medical benefits
Financial accounting The field of accounting that provides economic and financial information for investors, creditors, and other external users.
Financial Accounting Standards Board (FASB) A private organization that establishes generally accepted accounting principles.
Financing activities Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders and providing them with a return on their investment
Fiscal year An accounting period that is one year in length
FOB destination Freight terms indicating that the goods will be placed free on board at the buyer’s place of business, and the seller pays the freight costs
FOB shipping point Freight terms indicating that goods are placed free on board the carrier by the seller, and the buyer pays the freight costs
Footing The totaling of a column of a journal
Fringe benefits Any form of employee compensation except salary and wages. This may include insurance, retirement, bonus plans, or leaves
Full disclosure principle Accounting principle that circumstances and events that make a difference to financial statement users should be disclose
General journal The most basic form of journal
General ledger A ledger that contains all asset, liability, and stockholders’ equity accounts
General manager This person is the manager of the entire hotel. He or she manages the hotel through the various department heads
Generally accepted accounting principles (GAAP) A set of rules and practices, having substantial authoritative support, that are recognized as a general guide for financial reporting purposes
Going concern assumption The assumption that the enterprise will continue in operation long enough to carry out its existing objectives and commitments
Gross earnings Total compensation earned by an employee
Gross profit The excess of net sales over the cost of goods sold
Gross receipts method A method of tip reporting which all gross receipts of employees are totaled and then multiplied by 8 percent to determine the amount of tips an employee should report
Hospitality Financial and Technology Professionals (HFTP) A membership-based organization for financial and technology professionals. Its aim is to provide continuing education, resources, certifications, information sharing, and networking opportunities for its membership. It also produces the HITEC trade show; the largest technology trade show for the hospitality industry worldwide
Income statement A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time
Income Summary A temporary account used in closing revenue and expense accounts
Indirect method A method of preparing a statement of cash flows in which net income is adjusted for items that did not affect cash, to determine net cash provided by operating activities
Interim periods Monthly or quarterly accounting time periods
Intangible assets Noncurrent resources that do not have physical substance
International Accounting Standards Committee (IASC) An accounting organization whose purpose is to formulate and publish international accounting standards and to promote their acceptance worldwide
Investing activities Cash flow activities that include (a) acquiring and disposing of investments and productive longlived assets and (b) lending money and collecting on those loans
Journal An accounting record in which transactions are initially recorded in chronological order
Journalizing The entering of transaction data in the journal
Ledger The entire group of accounts maintained by a company
Liabilities Creditorship claims on total assets.
Liquidity The ability of a company to pay obligations that are expected to become due within the next year or operating cycle
Long-term investments Resources not expected to be realized in cash within the next year or operating cycle
Long-term liabilities (Long-term debt) Obligations expected to be paid after one year
Managerial accounting The field of accounting that provides economic and financial information for managers and other internal users.
Matching principle Accounting principle that expenses should be matched with revenues in the period when efforts are expended to generate revenues
Materiality The constraint of determining if an item is important enough to likely influence the decision of a reasonaIncome from operations Income from a company’s principal operating activity; determined by subtracting cost of goods
sold and operating expenses from net sales
Monetary unit assumption Accounting assumption that only transaction data capable of being expressed in monetary terms should be included in accounting records
Multiple-step income statement An income statement that shows numerous steps in determining net income (or net loss)
National Restaurant Association (NRA) A trade association whose members are mostly restaurateurs and restaurant corporations in the United States
Net income The amount by which revenues exceed expenses.
Net loss The amount by which expenses exceed revenues.
Net sales Sales less sales returns and allowances and sales discountsbly prudent investor or creditor
Operating activities Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income
Operating cycle The average time required to go from cash to cash in producing revenues
Operating expenses Expenses incurred in the process of earning sales revenues that are deducted from gross profit in the income statement
Other expenses and losses A nonoperating activities section of the income statement that shows expenses from auxiliary operations and losses unrelated to the company’s operations
Other revenues and gains A nonoperating activities section of the income statement that shows revenues from auxiliary operations and gains unrelated to the company’s operations
Partnership An association of two or more persons to carry on as co-owners of a business for profit.
Periodic inventory system An inventory system in which detailed records are not maintained throughout the accounting period and the cost of goods sold is determined only at the end of an accounting period
Permanent (real) accounts Balance sheet accounts whose balances are carried forward to the next accounting period
Perpetual inventory system An inventory system in which the cost of each inventory item is maintained throughout the accounting period and detailed records continuously show the inventory that should be on hand
Post-closing trial balance A list of permanent accounts and their balances after closing entries have been journalized and posted
Posting The procedure of transferring journal entries to the ledger accounts
Prepaid expenses Expenses paid in cash and recorded as assets before they are used or consumed
Profit margin percentage Profitability measure that indicates the percentage of each dollar of sales that results in net income; calculated as net income divided by net sales. Also called rate of return on sales
Property, plant, and equipment Assets of a relatively permanent nature that are being used in the business and not
intended for resale
Proprietorship A business owned by one person .
Purchase allowance A transaction in which the seller deducts from the purchase price to compensate the buyer for less-than-satisfactory merchandise
Purchase discount A cash discount claimed by a buyer for prompt payment of a balance due
Purchase invoice A document that supports each credit purchase
Purchases journal A special journal used to record all purchases of merchandise on account
Purchase return A transaction in which a dissatisfied purchaser returns the goods for credit or cash
Relevance The quality of information that indicates the information makes a difference in a decision
Reliability The quality of information that gives assurance that it is free of error and bias
Retained earnings Net income that is retained in the business
Retained earnings statement A financial statement that summarizes the changes in retained earnings for a specific period of time
Return on assets An overall measure of a company’s profitability; calculated as net income divided by total assets
Return on common stockholders’ equity Profitability measure that shows the rate of net income earned for each dollar of owners’ investment; calculated as net income divided by common stockholders’ equity
Revenues The gross increase in stockholders’ equity resulting from business activities entered into for the purpose of earning income
Revenue recognition principle Accounting principle that revenue should be recognized in the accounting period in which it is earned (generally at the point of sale)
Sales discount A reduction given by a seller for prompt payment of a credit sale
Sales invoice A document that supports each credit sale
Sales journal A special journal used to record all sales of merchandise on account
Sales revenue (sales) Primary source of revenue in a merchandising company.
Securities and Exchange Commission (SEC) A governmental agency that requires companies to file financial reports in accordance with generally accepted accounting principles.
Segregation of duties A separation of functions or division of work so as to provide a reliable basis of evaluating the work of each employee
Selling expenses Expenses associated with making sales
Simple entry A journal entry that involves only two accounts
Single-step income statement An income statement that shows only one step in determining net income (or net loss)
Special journal A journal that is used to record similar types of transactions, such as all credit sales
Specific identification method An actual, physical flow inventory costing method in which items still in inventory are specifically costed to arrive at the total cost of the ending inventory
Statement of cash flows A financial statement that provides information about the cash inflows (receipts) and cash outflows (payments) of an entity for a specific period of time.
Stockholders’ equity The ownership claim of shareholders on total assets
Subsidiary ledger A group of accounts with a common characteristic.
T account The basic form of an account
Temporary (nominal) accounts Revenue, expense, and Dividends accounts whose balances are transferred to Retained Earnings at the end of an accounting period
Time period assumption Accounting assumption that the economic life of a business can be divided into artificial time periods
The Uniform System of Accounts for the Lodging Industry A system of accounting guidelines and procedures developed for the use of hotel and lodging properties
The Uniform System of Accounts for Restaurants A system of accounting guidelines and procedures developed for the use of hotel and lodging properties
The Uniform System of Financial Reporting for Clubs A system of accounting guidelines and procedures developed for the use of various types of clubs
Three-column form of account A form with columns for debit, credit, and balance amounts in an account
Transactions The economic events of the enterprise that are recorded by accountants.
Trial balance A list of accounts and their balances at a given time
Unearned revenues Cash received and recorded as liabilities before revenue is earned
Useful life The length of service of a productive facility.
Voucher An authorization form prepared for each payment by check in a voucher system
Voucher system A network of approvals by authorized individuals acting independently to ensure that all disbursements by check are proper
Working capital The excess of current assets over current liabilities.
Work sheet A multiple-column form that may be used in the adjustment process and in preparing financial statements.
Wage and Tax Statement (Form W-2) A form showing gross earnings, FICA taxes withheld, and income taxes withheld which is prepared annually by an employer for each employee
Wages Amounts paid to employees based on a rate per hour or on a piecework basis
| Work sheet A multiple-column form that may be used in the adjustment process and in preparing financial statements. Wage and Tax Statement (Form W-2) A form showing gross earnings, FICA taxes withheld, and income taxes withheld which is prepared annually by an employer for each employee Wages Amounts paid to emploees based on a rate per hour or on a piecework basis |