AP Intermediate Commerce (BIEAP) key terms

A method of book-keeping in which every transaction is recorded twice, once as a debit and once as a credit, so that total debits always equal total credits and the books stay balanced.

The first written record of a business transaction, showing the date, the accounts debited and credited, the amount, and a short narration explaining why the transaction took place.

A separate page or record in which all transactions affecting one particular person, asset, liability, income or expense are collected, showing debits on the left and credits on the right with a running balance.

A single journal entry that records more than two accounts at once, for example one debit to several creditors or several debits against one credit, instead of splitting the transaction into separate two-line entries.

A statement listing all ledger balances, debit balances on one side and credit balances on the other, prepared to test whether total debits equal total credits before final accounts are drawn up.

A temporary account opened to hold the difference in a trial balance that does not agree, and cleared later when the underlying errors are traced and corrected.

A book-keeping mistake in which a transaction is entered in the wrong class of account, such as treating a capital purchase of machinery as a repairs expense, so the trial balance still agrees.

A statement prepared to explain why the cash book bank balance differs from the bank statement balance, listing items such as unpresented cheques, deposits not yet credited and bank charges.

A cheque that the business has issued and recorded in its cash book but the payee has not yet presented to the bank, so it has not reduced the bank statement balance.

A book that records all cash and bank receipts and payments, often serving both as a journal and as a ledger account for cash, with debit and credit columns.

A small cash book kept by a petty cashier to record minor day-to-day payments like postage, stationery and conveyance, usually run on the imprest system where a fixed float is reimbursed.

A method of controlling petty cash in which a fixed sum is given to the petty cashier at the start, and the amount spent is reimbursed periodically so the float returns to its original level.

The systematic reduction in the recorded value of a fixed asset over its useful life, charged as an expense in the profit and loss account to reflect wear, tear and obsolescence.

A depreciation method that charges an equal amount every year, calculated as the cost of the asset minus its estimated scrap value, divided by the number of years of expected use.

An estimated amount set aside from profits to cover receivables that may not be collected, shown as a reduction in the value of debtors in the balance sheet.

Amounts owed by customers that have become irrecoverable and are written off as a loss, because the debtor is insolvent or has disappeared and payment cannot be expected.

The first part of the final accounts, which matches net sales against the cost of goods sold to show gross profit or gross loss for the accounting period.

The statement that starts with gross profit and deducts operating expenses while adding other incomes, arriving at net profit or net loss for the period.

A statement of the financial position of a business on a given date, listing assets, liabilities and capital, where total assets equal capital plus liabilities.

The excess of net sales over the cost of goods sold, before deducting operating expenses such as rent, salaries and depreciation, and shown in the trading account.

A business owned, financed and managed by one person, who receives all profits and bears unlimited personal liability for the debts of the business.

A business formed by two or more persons who agree to share profits and losses, governed by a partnership deed that sets out capital, profit-sharing ratio and duties.

A business organisation registered under company law, with capital divided into shares, owned by shareholders and treated as a separate legal person from its owners.

The principle that a shareholder or owner can lose only the amount invested or guaranteed, and is not personally responsible for the unpaid debts of the business.

The money a company raises by issuing shares to investors, divided into units of equal value that carry ownership rights such as voting and dividends.

A commercial organisation owned and controlled wholly or partly by government, set up to provide goods or services and often given a social as well as financial objective.

The principle that, other things remaining equal, the quantity demanded of a good rises when its price falls and falls when its price rises, giving an inverse relationship.

A measure of how strongly quantity demanded responds to a change in price, calculated as the percentage change in quantity demanded divided by the percentage change in price.

The price at which the quantity of a good that buyers are willing to purchase exactly equals the quantity sellers are willing to offer, so there is neither shortage nor surplus.

The value of the next best alternative given up when a resource is used for one purpose rather than another, a central idea in allocating scarce resources.

The total money value of all final goods and services produced by a country during a year, measured by methods such as the product, income and expenditure approaches.

The market value of all final goods and services produced within a country's borders in a given period, regardless of who owns the factors of production.

A sustained rise in the general price level, which reduces the purchasing power of money and is commonly measured through changes in a consumer price index.

The part of a computer that fetches instructions, decodes them and carries out arithmetic and logical operations, coordinating the other hardware units.

The fast internal storage that the processor reads and writes directly while programs run, including RAM, which is volatile, and ROM, which keeps its contents when power is off.

System software that manages hardware, files and memory, schedules programs and provides a user interface so that application software can run on the computer.

Application software that arranges data in rows and columns of cells, allowing formulas, functions and charts to be used for calculations and analysis.

An organised collection of related data stored so that it can be searched, updated and retrieved efficiently, usually managed through database software.

A commercial document sent by a seller to a buyer listing goods or services supplied, their quantities, rates, amounts and payment terms, and serving as a request for payment.

A preliminary document sent before a sale is confirmed, stating the goods, price and terms so the buyer can arrange payment or approval; it is not a demand for payment.

A document prepared by a buyer to inform the seller that the seller's account has been debited, for example because goods were returned or an overcharge was found.

A document issued by a seller to reduce the amount owed by a buyer, commonly when goods are returned or an allowance is granted, and recorded as a reduction of the invoice value.

A formal written communication between organisations or between a firm and its customers, following a set layout with sender's address, date, reference, salutation, body, complimentary close and signature.

A sales or information letter sent in identical form to many recipients at once, used to announce a new product, price change or opening of a branch.

A short internal message used within an organisation to pass information, instructions or decisions between departments, usually without a salutation or complimentary close.

A sentence construction in which the subject performs the action, as in the manager approved the proposal, generally preferred in business writing for being direct and clear.

A sentence construction in which the subject receives the action, formed with a form of be plus the past participle, useful when the doer is unknown or unimportant.

The rule-governed joining of sounds at the boundary of two words, where the final sound of one word changes or merges with the initial sound of the next.

A compound word formed by combining two or more words into a single unit, whose meaning depends on the relationship between the constituent words.

A grammatical case ending attached to a noun or pronoun to show its relation to other words in the sentence, such as doer, object, instrument or possessor.

A figure of speech or poetic ornament that adds beauty or emphasis to a literary composition, such as simile, metaphor or alliteration.

The aesthetic sentiment or emotional flavour that a literary work evokes in a sensitive reader, classified in classical poetics into nine principal types.