Accountancy/Glossary

Asset

Anything with probable future economic benefit that is obtained or controlled by a company and is the result of a past transaction.

Cr

The abbreviation for Credit.

COGS

The abbreviation for Cost of goods sold

Controlling Account

An account in the general ledger that summarizes the account balances in a subsidiary ledger.

Depreciation

The process of spreading the cost of acquiring a fixed asset over its useful economic life.

Double Entry

is the principle of accounting which requires that every transaction has two effects one of which is a debit and the other of which is a credit of the same amount.

Dr

The abbreviation for Debit.

FIFO (First IN First OUT)

The inventory system leave new inventory in stock until the old ones sold by legal terms.

Fixed Asset

An asset acquired by a business where there was no intention to make money from immediately reselling the asset. e.g A Van used by a plumbing firm.

General Ledger

The main ledger that has all the income statement and balance sheet accounts.

Liability

Probable future sacrifice of economic benefits, or the entity owes somebody something.

Prepayment

A Prepayment is a type of asset arising from the fact that the business has alreasy been invoiced for the right to all or part of a service in a future period e.g. rent for next year, paid this year.

Stock

Stock is the set of those assets held by the business intended for resale in their current form or in a modified form. Stock includes raw materials, components, work in progress and finished goods.

Subsidiary Ledger

Subsidiary Ledger is a ledger that has individual accounts with similar characteristics.

UEL

The abbreviation for useful economic life.

Useful economic life (UEL)

The useful economic life of a fixed asset is the time period for which the asset is likely to be useful in generating profit for a company (or meeting the aims of a charity).

WIP

WIP is the abbreviation for Work in Progress

Work in Progress (WIP)

Work in progress is the set of assets held by a business which are part way through some process after which they can be resold. Once completed the articles will cease to be WIP and become finished goods.