D - Acounting Glossary
Accounting definitions.
Source: Wikipedia.org
Debit
Debit is an accounting and bookkeeping term that
comes from the Latin word debere which means "to
owe." The opposite of a debit is a credit.
Debit is abbreviated Dr while credit is abbreviated
Cr. A debit can be either a positive or negative
entry to an account depending on what type of
account is being debited. Asset and expense accounts
increase in value when debited, whereas liability,
capital, and revenue accounts decrease in value
when debited.
Debt
Debt is that which is owed. People or organisations
often enter into agreements to borrow something.
Both parties must agree on some standard of deferred
payment, most usually a sum of money denominated
as units of a currency, but sometimes a like good.
For instance, one may borrow shares, in which
case, one may pay for them later with the shares,
plus a premium for the borrowing privilege, or
the sum of money required to buy them in the market
at that time. There are numerous types of debt
obligations. They include loans, bonds, mortgages,
promisary notes, and debentures.
Deficit
A budget deficit occurs when an entity (often
a government) spends more money than it takes
in. The opposite is a budget surplus.
Depreciation
Depreciation is a decrease in the value of an
asset, caused by wear and tear or by obsolescence.
In accounting, the act of depreciating an asset
is also supposed to create a reserve for the replacement
of the asset. The use of depreciation affects
a company's (or an individual's) financial statements,
and, more importantly to them, their taxes.
Dividend
A dividend is the distribution of profits to a
company's shareholders. The primary purpose of
any business is to create profit for its owners,
and the dividend is the most important way the
business fulfills this mission. When a company
earns a profit, some of this money is typically
reinvested in the business and called retained
earnings, and some of it can be paid to its shareholders
as a dividend. Paying dividends reduces the amount
of cash available to the business, but the distribution
of profit to the owners is, after all, the purpose
of the business.
Double-Entry Booking
Double-entry book-keeping is the standard accounting
practice for recording financial transactions.
It was invented by Luca Pacioli, a close friend
of Leonardo da Vinci, in a 1494 footnote to a
scientific paper. The system is based on the concept
that a business can be described by a number of
different variables or accounts, each describing
an aspect of the business in monetary terms. Every
transaction has a 'dual effect'—increasing
one aspect and decreasing another, in such a way
that all of the different variables always sum
to zero.
