accounting cycle
A term that describes the steps when processing transactions (analyzing, journalizing, posting, preparing trial balances, adjusting, preparing financial statements) in a manual accounting system. Today many of the steps occur simultaneously when using accounting software
accounting equation
Assets = Liabilities + Owner's Equity. For a corporation the equation is Assets = Liabilities + Stockholders' Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets. Because of double-entry accounting this equation should be in balance at all times. The accounting equation is expressed in the financial statement known as the balance sheet.
accounting net income flows
The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
accounting principles
The standards, rules, guidelines, and industry-specific requirements for financial reporting.
Accounting Principles Board (APB)
This group preceded the current Financial Accounting Standards Board (FASB). The APB members served in a part-time capacity to determine the accounting standards from 1962 to 1973. The accounting rules established by the APB were titled Opinions and remain as part of the generally accepted accounting principles (unless superseded by standards issued by the FASB).
accounting rate of return
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.