Glossary of Accounting Terms
Letters C-D
Cash (or cash-basis) accounting recognizes the effects of accounting events when cash is exchanged regardless of the time events occur. Cash-basis accounting is not in accordance with generally accepted accounting principles (GAAP).
Cash flow statement summarizes information about cash outflows (payments) and inflows (receipts). This statement may also include certain information not related to actual cash flows.
Cash inflows are sources of cash; for example, payments from customers, capital acquisitions, etc.
Cash outflows are uses of cash; for example, payments to vendors, paying off bank loans, etc.
Claims exchange transactions increase one claim account and decrease another. Thus, only claim accounts are involved in such transactions. Total claims remain unchanged. For example, recording salaries payable is an example of a claim exchange transaction.
Claims: A company's assets belong to the resource providers who are said to have claims on the assets.
Closing entries are made to free up (to zero) the nominal (temporary) accounts so that they are prepared to be used in the next accounting period.
Closing the accounts, or closing the books is the process of transferring the balances from the temporary accounts to the permanent account, Retained Earnings.
Contra asset account is one that is offset against an asset account on the balance sheet. Contra asset accounts have credit balances and thus, reduce asset account balances.
Contributed capital is a component of equity resulting from contributions of capital resources from owners.
Cost of goods available for sale is the cost of goods acquired during a period plus the cost of goods on hand at the beginning of the period. This cost represents all inventories available for sale during the period.
Cost of goods sold (COGS) is the difference between the cost of goods available for sale and the cost of goods on hand at period end. This cost represents the cost of goods sold by the company during the period.
Credit is the right side of a T account.
Debit is the left side of a T account.
Deferral refers to recognition of revenues or expenses at some time after cash has been transferred.
Depletion is allocation of the cost of natural resources to expenses in a systematic and rational manner over the resources useful life.
Depreciation is allocation of the cost of property, plant, and equipment to expenses over their useful (economic) life in a systematic and rational manner.
Direct write-off method of accounting for bad debt is the practice of recording bad debt expense when a particular account is determined to be uncollectible. No allowance for bad accounts is recorded at the end of each period under this method. Receivables write-off is recorded directly in the bad debt expense account in the income statement.
Discount amortization is the process of converting discounts on notes payable to interest expense over a specified period of time.
Discount bonds are bonds that have interest included in the face value. When the note matures, the borrow only pays the face value, which includes interest in it.
Double-declining method applies a constant rate (double of the straight-line rate) to the net book value of the asset and produces a decreasing annual depreciation expense over the asset useful life. The decrease in depreciation relates to the decrease in the asset's net book value in each subsequent period.
Double-entry bookkeeping rule states that any transaction is recorded at least twice.
Double-entry recording system provides for the equality of total debits and total credits.
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