gce o level principles of accounts glossary
TRANSCRIPT
A Account a record of transactions of a
Accounting planning, recording,
Accounting elements classification of transactions into the types of accounts
Accounting equation an equation showing the relationship among asse
equity, mathematically, it is
Accounting period the length of ti
information, usually 12 months
Accrual basis of accounting
(goods/services are provided
this oppose the Cash basis of accounting
Accrued revenue income earn in this accounting period yet to
Accrued expense resources consumed that has not been paid for in this accounting period
Acid-test ratio see Quick ratio
Adjusting entries journal entries recorded to update general ledger accounts at the end of an
accounting period
Amalgamation the combination of two or more existing businesses into a single entity
Appropriation account
partners
Asset anything of value that is owned
B Bad debts debtor amounts
Balance sheet a financial statement that reports assets, liabilities, and owner's equity on a specific
date see Financial statements
Balance Day Adjustments
accounting period see Adjusting entries
Bank statement a report
Book of original entry see Journal
Bookkeeping the systematic
the financial condition of a business entity.
Book value of a fixed asset
C Capital the account used to summaris
Capital expenditure the purchase of fixed assets which benefits the business for more than one
accounting period. This expense appears in the balance sheet
Cash basis of accounting
expenses when they are paid
accounting
Cash book a special journal used to record only cash
Cash discount a deduction from the invoice amount to encourage ear
customer
Cash flows the cash receipts and cash payments of a company
Cash sale a sale in which cash is received for the total amount of the sale at the time of the
transaction
Chart of accounts a list of accounts used by a business
Cheque a business form ordering a bank to pay cash from a bank account
Cheque counterfoil record of amount and details of the transaction paid by cheque
Closing entries journal entries used to prepare temporary accounts for a new accounting period
Closing stock ending merchandise inventory on hand for sale to customers
Consistency concept The accounting treatment applied to an item should be the same for all
accounting periods
Contra account an account that reduces a related account on a financial
Contra balance an account balance that is opposite the normal balance
“contradict,””contraband”)
Correcting entry a journal entry made to correct an error in the ledger
GCE O’/N’ LEVEL PRINCIPLES OF ACCOUNTS (POA) KEY TERMS & DEFINITIONSwww.principlesofaccounts.com.sg
a record of transactions of a similar nature
planning, recording, summarizing, analysing, and interpreting financial information
classification of transactions into the types of accounts
an equation showing the relationship among asse
, mathematically, it is Assets = Owner’s Equity + Liabilities
the length of time for which a business summarises and reports
information, usually 12 months
Accrual basis of accounting the accounting method that records revenues when they are earned
provided) and expenses when they are incurred
Cash basis of accounting
income earn in this accounting period yet to
resources consumed that has not been paid for in this accounting period
see Quick ratio
journal entries recorded to update general ledger accounts at the end of an
the combination of two or more existing businesses into a single entity
a partnership financial statement showing net income
anything of value that is owned by the business which brings economic benefits
debtor amounts that is irrecoverable
a financial statement that reports assets, liabilities, and owner's equity on a specific
see Financial statements
Adjustments adjusting entries are made on balance day or the last day of the
see Adjusting entries
a report showing the transactions between a depositor
see Journal
the systematic maintenance and convenient records of all transactions in order to show
the financial condition of a business entity.
of a fixed asset see Net book value of fixed asset
the account used to summarise the owner's equity in a business
the purchase of fixed assets which benefits the business for more than one
accounting period. This expense appears in the balance sheet
Cash basis of accounting the accounting method that records revenues when they are received and
nses when they are paid, this oppose the accrual concept of accounting see
a special journal used to record only cash receipts and payment
uction from the invoice amount to encourage ear
the cash receipts and cash payments of a company
a sale in which cash is received for the total amount of the sale at the time of the
a list of accounts used by a business
a business form ordering a bank to pay cash from a bank account
record of amount and details of the transaction paid by cheque
journal entries used to prepare temporary accounts for a new accounting period
ending merchandise inventory on hand for sale to customers
The accounting treatment applied to an item should be the same for all
an account that reduces a related account on a financial
an account balance that is opposite the normal balance
band”)
a journal entry made to correct an error in the ledger
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CE O’/N’ LEVEL PRINCIPLES OF ACCOUNTS KEY TERMS & DEFINITIONS ciplesofaccounts.com.sg
ing, and interpreting financial information
classification of transactions into the types of accounts
an equation showing the relationship among assets, liabilities, and owner's
Assets = Owner’s Equity + Liabilities
me for which a business summarises and reports financial
nting method that records revenues when they are earned
and expenses when they are incurred (goods/services are consumed),
income earn in this accounting period yet to be received
resources consumed that has not been paid for in this accounting period
journal entries recorded to update general ledger accounts at the end of an
the combination of two or more existing businesses into a single entity
a partnership financial statement showing net income or loss distribution to
by the business which brings economic benefits
a financial statement that reports assets, liabilities, and owner's equity on a specific
entries are made on balance day or the last day of the
a depositor and a bank
maintenance and convenient records of all transactions in order to show
e the owner's equity in a business
the purchase of fixed assets which benefits the business for more than one
the accounting method that records revenues when they are received and
, this oppose the accrual concept of accounting see Accrued basis of
receipts and payment transactions
uction from the invoice amount to encourage early repayment from the
the cash receipts and cash payments of a company
a sale in which cash is received for the total amount of the sale at the time of the
a business form ordering a bank to pay cash from a bank account
record of amount and details of the transaction paid by cheque
journal entries used to prepare temporary accounts for a new accounting period
ending merchandise inventory on hand for sale to customers
The accounting treatment applied to an item should be the same for all
an account that reduces a related account on a financial statement
an account balance that is opposite the normal balance (think
a journal entry made to correct an error in the ledger
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journal entries recorded to update general ledger accounts at the end of an
maintenance and convenient records of all transactions in order to show
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Cost of goods sold the total original price of all goods sold during a accounting period
Credit an amount recorded on the right side of a T account
Credit sale a sale for which cash will be received at a later date
Credit note a form prepared by the vendor showing the amount deducted for returns or for any
amounts overcharged
Creditor a person or organisation to whom a liability is owed
Creditor Control Account a subsidiary ledger containing only accounts for suppliers from whom items
are purchased or bought on credit
Current assets cash and other assets expected to be exchanged for cash or consumed within a year
Current liabilities liabilities due within a short time, usually within a year
Current ratio a ratio that shows the numeric relationship of current assets to current liabilities D Day book see Journal
Debit an amount recorded on the left side of a T account
Debit note a form prepared by the vendor to add charges to an invoice previously issued
Debtors Control Account a subsidiary ledger containing only accounts for customers who bought on
credit also known as Sales ledger control account
Depreciation the loss in the value of a fixed asset over a period of time
Depreciation expense the portion of a fixed asset's cost that is transferred to an expense account in
each accounting period during a fixed asset's useful life
Diminishing method see Reducing balance method
Discount allowed see Cash discount
Dishonoured cheque a cheque that a bank refuses to clear
Dividends earnings distributed to stockholders who invested in a business
Double-entry accounting the recording of debit and credit parts of a transaction, based on Assets =
Liabilities + Owner’s Equity
Doubtful debts amount from debtors which are expected as uncollectible from debtors.
Drawings assets taken out of a business for the owner's personal use
E Entry information for each transaction recorded in a journal
Equities financial rights to the assets of a business
Ethics refers to the standards of conduct by which one’s actions are judged as right or wrong, honest
or dishonest, fair or not fair
Error of complete reversal of entries Both entries of a transaction are made on the opposite sides
Error of compensation errors of the same amount are recorded on both the debit and credit sides,
thus cancelling each other
Error of omission the complete omission of the double-entry records for a transaction which has
taken place.
Error of commission Double entries recorded are of the correct amounts and on the right side of the
account but in the wrong accounts of the same category
Error of principle Double entries are recorded but in the wrong category of accounts.
Error of original entry Entries are made to both the debit and credit sides of with the same incorrect
amount
Expenditures cash disbursements and liabilities incurred for the cost of goods delivered or services
rendered
Expense resources used up resulting from the operation of a business F Financial performance a measure of how well a business can use assets from its primary mode of
business and generate revenues
Financial position the state of and the relationships among the various financial data found on a
business' balance sheet.
Financial statements a formal record of the financial activities of a business
For GCE O/N levels, the key financial statements are Profit and Loss Statement and Balance Sheet.
Fixed assets assets that will be used for a number of years in the operation of a business Float a specified amount of petty cash at the start of the period
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G Gain on disposal of fixed assets revenue that result when a fixed asset is sold for more than book
value
General journal a journal with two amount columns in which all kinds of entries can be recorded
General ledger a ledger that contains all accounts needed to prepare financial statements
Goodwill the value of a business in excess of the net worth of the business
Going concern assumption that business will continue indefinitely
Gross profit the difference between revenue and the cost of goods sold, before deducting operating
expenses
Gross profit margin measures the gross profit earned from every dollar of sales
Goods and Service Tax, GST (Singapore) a broad-based value added tax levied on import of goods, as
well as nearly all supplies of goods and services see Value Added Tax
Gross profit on sales the revenue remaining after cost of goods sold has been deducted
H Historical cost concept states that all business transactions are recorded at the cost at the time it took place.
I Income statement a financial statement showing the revenue and expenses during the accounting
period
Incomplete records the recording of transactions which does not observe the double-entry rules.
Impress system is a system for controlling petty cash. The petty cashier is given an amount in advance
of expenditure. Under the Imprest system, the chief cashier replenishes the cash such that the petty
cash box always has the same amount of float at the start of each period
Insurance on purchases an expense in under the Trading account to cover possible losses, damages or
theft while goods are being brought to the business
Intangible assets assets of a non-physical nature that brings economical benefits for a business
Interest an amount paid for the use of money for a period of time
Interest on capital given to compensate partners who contribute money into the business
Interest on drawings amounts owed to the business by the partners for withdrawal of
funds or goods for personal use, given to compensate for the opportunity cost of the
business to generate profits
Interest expense the interest accrued on money borrowed
Interest income the interest earned on money loaned
Inventory see Stock
Invoice a form containing the description of the goods or services sold, the quantity, and the price
J Journal a book for recording transactions, also known as book of original entry or day books
Journal entry the act of recording transactions in a journal L Ledger a group of accounts
Liability an amount owed by a business
List price a business's printed or catalog price
Long-term assets see Fixed assets
Long-term liabilities amounts owing for more than a year
Loss on fixed assets the loss that results when a fixed asset is sold for less than book value
Lower of cost or net realisable value using the lower of cost or market value to determine the cost of
closing stock
M Market value the price at which a share of stock may be sold on the stock market
Markup the amount added to the cost of goods to establish the selling price
Matching principle The appropriate expenses should be matched to all the revenue to determine
profits in a given accounting period.
Materiality concept how each transaction is captured and dealt with in the accounting records
depends on its significance and impact
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Monetary assumption or money measurement only transactions quantifiable/ expressed in monetary
terms are recorded.
Mutual agency the right of all partners to contract for a partnership
N Net book value of a fixed asset the original cost of a fixed asset minus accumulated depreciation
Net income the difference between total revenue and total expenses when total revenue is greater
Net loss the difference between total revenue and total expenses when total expenses are greater
Net purchases total purchases less purchases discount and purchases returns and drawings from
owners
Net sales total sales less sales discount and sales returns and allowances
Normal balance the side of the account that is increased Net realisable value the market value of an asset O Objectivity concept the methods used to prepare financial reports should be free from personal bias
and based on verifiable evidence
Operating expenses the payments necessary to operate a business on a day-to-day basis
Other revenue revenue from activities other than normal business operations
Owner's equity the amount remaining after the value of all liabilities is subtracted from the value of
all assets
P Partnership a business in which two or more persons combine their assets and skills
Partnership agreement a written agreement setting forth the conditions under which a partnership
is to operate
Partner Salary given to compensate a partner managing the business and forgoing the opportunity
for employment elsewhere
Petty cash an amount of cash kept on hand and used for making small payments
Petty cash voucher a form showing proof of a petty cash payment
Postdated cheque a cheque with a future date on it
Posting transferring information from a journal entry to a ledger account
Prepaid expenses expenses paid in one accounting period but not reported as expenses until a later
accounting period
Profit and loss statement see Income statement
Provision for Doubtful debts allowance made amounts expected to be uncollectible from debtors at
a given date
Provision for Depreciation the total amount of depreciation expense that has been recorded since
the purchase of a fixed asset, also known as Accumulated depreciation
Purchase invoice an invoice used as a source document for recording a purchase on credit transaction
Purchases journal a special journal used to record only purchases of goods on credit
Purchases return credit allowed for the purchase price of returned goods, resulting in a decrease in
trade debtors
Q Quick ratio the number of times liquid assets cover the current liabilities. A safe ratio should be at least 1:1
R Rate of return of capital measures the net profit earned for every dollar invested by the owner
Rate earned on average total assets the relationship between net income and average total assets
Rate of stock turnover the number of times the average amount of goods is sold during a specific
period of time
Ratio a comparison between two numbers showing how many times one number exceeds the other
Receipt a business form giving written acknowledgement for cash received Residual value
see Estimated salvage value
Reducing balance method multiplying the book value of the fixed asset by a constant depreciation rate
at the end of each accounting period
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Revaluation method depreciation is calculated as the difference between the value of the asset at the
end of the period and the value of the asset at the beginning of the period.
Revenue income generated from the operation of a business
Revenue expenditure for day-to-day running of the business. Such expenses benefit the business
within a given period. This expense appears in the Profit and loss statement
Reversing entry an entry made at the beginning of one accounting period to reverse an adjusting
entry made in the previous accounting period
S Salary the money paid for employee services
Sales ledger control account see Debtors control account
Sales invoice an invoice used as a source document for recording a sale on credit
Sales journal a special journal used to record only sales of goods on credit
Sales return credit allowed a customer for the sales price of returned goods, resulting in a decrease in
the debtors’ account
Salvage/Scrap value the amount an owner expects to receive when a fixed asset is disposed
Service business a business that performs an activity for a fee
Sole proprietorship a business owned by one person
Source document a business paper from which information is obtained for a journal entry. Example:
bank statement, cheque counterfoil, credit note, debit note, payment voucher, invoice and receipt
Special journal a journal used to record only one kind of transaction. These are Purchase Journal,
Sales Journal, Returns Outwards Journal and Return Inwards Journals are special journals
Standing order a written, signed, and dated order from the business ordering a bank, to pay money
to a third party to make regular payments by a given date. GIRO is a common form of standing order
(in Singapore)
Statement of affairs shows the assets and liabilities of the firm at a particular period
Stock the amount of goods on hand
Stock turnover see Rate of Stockturn
Straight-line method of depreciation charging an equal amount of depreciation expense for a fixed
asset in each year of useful life
Subsidiary ledger a ledger that is summarized in a single general ledger account
Sundry expenses items which do not occur frequently enough to warrant record in their own
accounts
T T account an accounting device used to analyze transactions
Trade discount a reduction in the list price granted to customers to encourage bulk purchases
Transaction a business activity that changes assets, liabilities, or owner's equity
Trial balance a proof of the equality of debits and credits in a general ledger
U Unearned revenue revenue received in one accounting period but not earned until the next
accounting period
Useful life the number of years fixed assets is expected to be used
V Value Added Tax is a tax on spending on goods and services. The tax base of such a tax is the money
spent on consumption.
Vendor a business from which goods is purchased or supplies or other assets are bought
Voucher a business form used to show an authorised person's approval for a cash payment
W Wages see Salary
Withdrawals see Drawings
Working capital the amount of total current assets less total current liabilities
Writing off an account canceling the balance of a customer account because the customer does not
pay
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“Plenty Of As.” That’s what POA stands for. You plan your grades, organise your revision schedule, all while the other subjects. Then reality sets in. It is confusing. It seems like every one in your class don’t understand the teacher is talking about. Worse still, for some of you, this is teacher you have in the last 12 months. There is a constant CHANGE of methods and styles of teaching, multiple directions. You start to feel like your school grades. Confused and overwhelmed, you conclude, Don’t Worry – You’re Normal Chances are, what I just said sounds pretty hear that from my students a lot. It is a phenomenal that’s happening in many schools. But, you know what? There are no secrets. This course is designed to teach you MY approach to helping students understand accounting concepts. I’ll teach it to you in 5 days. This approach has been helping my students from failure grades to a achieving As and Bs for the last 5 years. It took me YEARS of trial and error to find a systematic way of understanding accounts which is durable and long If you need some extra push for your poly/JC admission, then give me 5 days.www.principlesofaccounts.com.sg/5days See you on the inside, Principal Coach Jump Grades Education
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That’s what POA
You plan your grades, organise your all while juggling
subjects.
Then reality sets in.
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the teacher is talking about. Worse still, for some of you, this is the third teacher you have in the last 12 months.
There is a constant CHANGE of methods and styles of teaching, multiple directions. You start to feel like your school
Confused and overwhelmed, you conclude, “This is a lot harder than I thought.”
You’re Normal
Chances are, what I just said sounds pretty familiar to you. And I’m not surprised. I hear that from my students a lot. It is a phenomenal that’s happening in many
But, you know what? There are no secrets.
This course is designed to teach you MY approach to helping students understand unting concepts. I’ll teach it to you in 5 days. This approach has been helping my
students from failure grades to a achieving As and Bs for the last 5 years.
It took me YEARS of trial and error to find a systematic way of understanding urable and long-lasting, based on real results.
If you need some extra push for your poly/JC admission, then give me 5 days.rinciplesofaccounts.com.sg/5days � click NOW.
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GCE O’/N’ LEVEL PRINCIPLES OF ACCOUNTS KEY TERMS & DEFINITION
www.principlesofaccounts.com.sg 6
There is a constant CHANGE of methods and styles of teaching, all pulling you in multiple directions. You start to feel like your school toying with your O/N level
“This is a lot harder than I thought.”
familiar to you. And I’m not surprised. I hear that from my students a lot. It is a phenomenal that’s happening in many
This course is designed to teach you MY approach to helping students understand unting concepts. I’ll teach it to you in 5 days. This approach has been helping my
students from failure grades to a achieving As and Bs for the last 5 years.
It took me YEARS of trial and error to find a systematic way of understanding lasting, based on real results.
If you need some extra push for your poly/JC admission, then give me 5 days. click NOW.
Get Results!
6
you in toying with your O/N level
familiar to you. And I’m not surprised. I hear that from my students a lot. It is a phenomenal that’s happening in many
This course is designed to teach you MY approach to helping students understand unting concepts. I’ll teach it to you in 5 days. This approach has been helping my
It took me YEARS of trial and error to find a systematic way of understanding