| accelerated depreciation methods |
Several alternative depreciation approaches that result in relatively more depreciation in early years of use, and smaller amounts during later years |
| account |
A record that is kept for each asset, liability, equity, revenue, expense, and dividend component of an entity |
| accounting |
A set of concepts and techniques that are used to measure and report financial information about an economic unit. |
| accounting changes |
Changes from one acceptable method of accounting to another acceptable method; like straight-line depreciation to a declining balance approach |
| accounting cycle |
The procedures needed to process transactions through an accounting system; including journalization, posting, adjusting, and preparing financial statements |
| accounting equation |
A financial relationship at the heart of the accounting model: Assets = Liabilities + Owners' Equity |
| Accounting Principles Board |
The private sector group charged with developing accounting standards from 1959 to 1973; primary authoritative pronouncements were known as "opinions" |
| accounts payable |
Amounts due to suppliers relating to the purchase of goods and services on credit |
| accounts receivable |
Amounts due from customers from credits sales of products or services; "trade receivables" |
| accrual |
Expenses and revenues that gradually accumulate throughout an accounting period |
| accrual basis |
The accounting process whereby revenues are measured and recorded as earned, while expenses are recorded as incurred |
| accrued expenses |
Unpaid expenses that have already been incurred |
| accrued revenues |
Revenues that have been earned and recorded, but are not as yet collected |
| adjusted trial balance |
A trial balance prepared after adjusting entries have been prepared and posted to the ledger |
| adjusting process |
To analyze account balances and update them at the end of an accounting period to reflect the correct measure of revenues and expenses |
| aging of accounts receivable |
Analysis used to estimate the uncollectible accounts; involves stratification of receivables based upon age |
| AICPA |
American Institute of CPAs; an organization whose members are CPAs interested in advancing the accounting profession |
| all inclusive approach |
A concept of income by which virtually all nonequity-based transactions and events are captured and reported in the income statement; the preferred approach for income theory |
| allowance method for uncollectibles |
A method that estimates uncollectibles as a portion of total receivables and establishes an offsetting contra allowance account |
| amortization |
The process used to allocate the cost of an intangible asset to the accounting periods benefited |
| amortized cost method |
The approach mandated for held-to-maturity securities; investments are reported at their cost with any premium or discount amortized over the life of the investment |
| annuities |
Streams of level (i.e., the same amount each period) payments occurring on regular intervals |
| assets |
The economic resources owned by an entity; entailing probable future benefits to the entity |
| auditing |
The examination of transactions and systems that underlie an organization's financial statements with the goal or reporting thereon |
| comparability |
A quality of accounting such that different companies may use different accounting methods, but there is still sufficient basis for valid comparison |
| compensated absences |
Term to describe paid time off; vacations, sick leave, etc. |
| compensating balance |
An amount that must be left on deposit and cannot be withdrawn |
| complex capital structure |
companies with options, warrants, or convertible bonds and stocks that may result in the issuance of additional shares |
| compound interest |
Interest calculations that provide for periodic inclusion of accumulated interest into the base on which interest is calculated; "interest on the interest" |
| available for sale securities |
Investments that are neither "held-to-maturity" or "trading;" a default category that is accounted for at fair value with changes in value recognized in other comprehensive income |
| balance sheet |
A financial statement that presents a firm's assets, liabilities, and owners' equity at a particular point in time |
| bank reconciliation |
A control procedure to establish and verify the correct cash balance via identification of errors, irregularities, and adjustments |
| bank statement |
The document received from a bank which summarizes deposits and other credits, and checks and other debits to a bank account |
| basic EPS |
The simplest earnings per share number; earnings available to common shares divided by weighted average shares, without factoring in potential dilution |
| betterment |
Expenditures that improve or increase the service potential of an asset even beyond its original new condition; such costs may be capitalized by increasing the asset's cost |
| bonds payable |
An obligation divided into transferable units requiring the issuer to make periodic interest payments and an eventual repayment of the face amount |
| book value |
Cost minus accumulated depreciation; the net amount at which an asset is reported on the balance sheet |
| book value per share |
Common stockholders' equity divided by common shares outstanding, to indicate stockholders' equity per share |
| boot |
Term used to describe additional monetary consideration that may accompany an exchange transaction |
| business component |
Part of a business with clearly distinguishable operations; a business segment, unit, subsidiary, or group of assets |
| callable bond |
A bond that provides the issuer an option to reacquire the bonds before scheduled maturity at a preset price |
| callable preferred |
Preferred stock that can be repurchased by issuer for a preset price |
| capital expenditures |
Ordinary and necessary costs incurred to place an item of property, plant, or equipment in its condition for intended use; such amounts are included in the asset account |
| capital lease |
A lease that effectively transfers the risks and rewards of ownership to the lessee |
| cash |
Items acceptable to a bank for deposit and free from restrictions to satisfying current debts; includes coins, currency, bank deposits, etc. |
| cash basis |
An accounting approach where revenue is recorded when cash is received (no matter when "earned"), and expenses are recognized when paid (no matter when "incurred") |
| cash budget |
A major component of a cash planning system that depicts cash inflows and outflows for a stated period of time |
| cash discount |
A reduction in invoice price offered to customers to encourage prompt payment of invoices |
| cash equivalents |
Short-term interest-earning financial instruments that are deemed to be highly secure and will convert back into cash within 90 days |
| certified public accountant (CPA) |
An individual who is licensed by a state to practice public accounting |
| change in accounting estimate |
A revision of assumptions used in a related accounting calculation (e.g., change in estimated useful life of an asset); handled prospectively by revising current and future periods |
| chart of accounts |
A listing of the accounts of an entity, along with any identification coding |
| closing process |
The process by which temporary accounts are "zeroed" out and the effects transferred to retained earnings |
| commercial substance |
The quality of an exchange transaction such that it changes the future cash flow potential of the entity |
| commitments |
Promises to engage in some future action; not necessarily creating a recordable accounting liability but potentially necessitating enhanced disclosure |
| common stock |
The residual equity interest in a corporation; last in liquidation but usually receiving the full benefits of any corporate growth |
| comprehensive income |
Net income plus items of other comprehensive income (e.g., market value adjustments of available for sale securities) |
| conservatism |
A general principle of accounting measurement; when in doubt understate assets and income and overstate liabilities |
| consignment |
To place inventory in the custody of another party without requiring them to purchase it, as a sales agent |
| consistency |
A quality of accounting holding that deviations in measured outcomes from period to period should be the result of deviations in underlying performance (not accounting quirks) |
| consolidation |
To prepare financial reports for a parent and subsidiary company as a single economic unit |
| contingent liabilities |
Events that may or may not give rise to an actual liability because the outcome is uncertain; examples include lawsuits, environmental damage issues, and so forth |
| contra asset |
An account that is subtracted from a related account -- contra accounts have opposite debit/credit rules |
| control account |
The total of all subcomponent account records for an account; e.g., the sum of all individual accounts receivable |
| convertible bond |
A bond that may be converted by the holder into stock of the issuing company |
| convertible preferred |
Preferred stock that can be exchanged for common stock at some preagreed ratio |
| corporation |
A form of business organization where ownership is represented by divisible units called shares of stock |
| cost flow assumption |
An assumption about how costs are assigned to inventory in the accounting records |
| cost of goods sold |
The total cost attributed to units of inventory actually sold during a period |
| coupon bond |
A bond that has detachable coupons that are exchanged for interest payments; historically popular but falling into disuse |
| credit |
The nature of an action to an account to indicate an increase (liabilities, equity, and revenue) or decrease (assets, expenses, and dividends); usually right-justified in an entry |
| credit memorandum |
A seller-prepared document evidencing an approved return of merchandise for credit against an account |
| cumulative effect |
A special income statement effect reflecting the amount higher or lower that income in prior years would have been had a new accounting method been in use during those years |
| cumulative preferred |
Preferred stock that is entitled to a periodic dividend, and those dividends must be paid (eventually) before any monies can be distributed to common stockholders |
| current assets |
Assets that will be converted into cash or consumed within one year or the operating cycle, whichever is longer |
| current liabilities |
Obligations that will be liquidated within one year or the operating cycle, whichever is longer |
| current operating approach |
A concept of income where income is limited to transactions related to central ongoing operations; not an acceptable approach for income theory |
| current ratio |
A measure of liquidity, calculated by dividing current assets by current liabilities |
| debenture bond |
A bond that lacks specific collateral; payment is only assured by the general faith and creditworthiness of the issuer |
| debit |
The nature of an action to an account to indicate an increase (assets, expenses, and dividends) or decrease (liabilities, equity, and revenue); usually left-justified in an entry |
| debit memorandum |
A purchaser-prepared document evidencing a return of merchandise to a seller |
| defined benefit plan |
A type of pension plan where the benefits are a function of years of service, pay, and age; the ultimate employer cost is not known in advance |
| defined contribution plan |
A type of pension plan where the benefits are based on amounts in trust for the benefit of the employee; employer contributions are usually a fixed percentage of pay |
| declining balance depreciation method |
An accelerated depreciation method by which a constant rate (that is a multiple of the straight-line rate) is multiplied by each period's beginning (constantly declining) book value |
| depletion |
The process used to allocate the cost of a natural resource asset to the accounting periods benefited |
| deposit in transit |
Receipts entered on company records but not yet posted by the bank |
| depreciable base |
Cost minus salvage value; the amount of cost that will be allocated to the service life |
| depreciation |
The process used to allocate the cost of a long-lived property to the accounting periods benefited |
| derivatives |
Investments accounted for a fair value that generally derive their value from some other item; examples include commodity futures, options, and so forth |
| diluted EPS |
An earnings per share number; adjusted to reflect the potential effect of dilutive securities |
| dilutive securities |
Options, warrants, convertible bonds, convertible stocks, and other items that have the potential to increase the number of shares outstanding |
| direct approach |
The preferred method for preparing the statement of cash flows; operating cash flows are presented according to their direct source (e.g., cash received from customers) |
| direct write-off method |
A simple, non-GAAP, method that expenses uncollectible accounts only as they are determined to be uncollectible and are written off |
| discontinued operations |
The special income statement reporting of the impact of disposing or abandoning of a component of a business |
| discount on bonds |
The difference between face value and issue price of a bond, where the issue price is less; causes the effective yield to be higher than that stated |
| dishonoring a note |
To fail to pay a note at maturity |
| dividend payout ratio |
Dividend per share divided by earnings per share |
| dividend rate |
Dividend per share divided by stock price; also called dividend yield |
| dividends |
Amounts paid from profits of a corporation to shareholders as a return on their investment in the stock of the entity |
| dividends in arrears |
An omitted dividend on cumulative preferred stock that must eventually be paid before any monies can be distributed to common stockholders |
| double-declining balance depreciation |
An accelerated depreciation method by which a constant rate (that is 200% of the straight-line rate) is multiplied by each period's beginning (constantly declining) book value |
| earnings |
A concept that relates to income from continuing operations plus/minus discontinued operations and extraordinary items |
| Earnings per share |
EPS; generally understood as the amount of income for each share of stock, but is actually better refined as basic and diluted EPS (see those definitions) |
| EBIT |
An analysts calculation to reflect "earnings before interest and taxes" |
| EBITDA |
An analysts calculation to reflect "earnings before interest, taxes, depreciation, and amortization" |
| effective-interest amortization |
A theoretically preferable method for amortizing premiums and discounts on bonds; interest expense is a constant percentage of the bonds ever-changing carrying value |
| employee |
A person who works for a specific business and whose activities are directed by that business |
| entity assumption |
Accounting information should be presented for circumscribed distinct economic units |
| equity method |
Method to account for stock investment when significant influence is present; changes in equity of the investee are recognized by the investor on a pro rata basis |
| exchange transaction |
Trading one asset for another; to be booked at fair value if the transaction has commercial substance |
| ex-dividend |
The event (date) when a transfer of stock ownership between shareholders will occur without the right for the purchaser to receive any previously declared dividends |
| expenses |
The costs incurred in producing revenues |
| extraordinary item |
The gain or loss resulting from a transaction or event that is both unusual in nature and infrequent in occurrence; reported below income from continuing operations |
| F.O.B. destination |
Free on Board destination; meaning the transfer of ownership of inventory will occur when the goods reach their destination and the seller will incur the freight charges |
| F.O.B. shipping point |
Free on Board shipping point; meaning the transfer of ownership of inventory will occur when the goods are shipped and the purchaser will incur the freight charges |
| fair value accounting |
Sometimes called "mark-to-market;" to record an investment at its fair value and recognize changes in value as it occurs |
| FICA |
Federal Insurance Contributions Act (also known as social security and Medicare); establishes a tax that employers must withhold and match for government-based retiree benefit |
| financial accounting |
An area of accounting that deals with external reporting to parties outside the firm; usually based on standardized rules an procedures |
| Financial Accounting Standards Board |
An organization charged with producing standards for financial reporting in the USA (FASB) |
| financial statements |
Core financial reports that are prepared to represent the financial position and results of operations of a company |
| financing activities |
A cash flow category; including receipts from stock issues, bonds, notes and loans, -- and payments for loan repayment, acquisitions of treasury stock, and dividend distributions |
| first-in, first-out |
FIFO; An inventory cost flow assumption based on the notion that the earliest costs are to be assigned to units sold |
| fiscal year |
A one-year accounting period that does not correspond to a calendar year |
| Form 1099 |
A form required to be issued to an independent contractor reporting amounts paid; to assist with tax compliance issues (this form used to report other payments like interest, etc.) |
| full disclosure principle |
All relevant facts that would influence investors' and creditors' judgments about the company are disclosed in the financial statements or related notes |
| FUTA |
Federal Unemployment Tax levied on employer to provide funds for unemployed workers; rate is dependent on existence of SUTA and employer history of layoffs, etc. |
| future value |
The amount to which an interest-earning amount is expected to grow over a stipulated time period at a given interest rate |
| GAAP |
Generally accepted accounting principles -- encompass the rules, practices, and procedures that define the proper execution of accounting |
| general ledger |
A record of the accounts comprising financial statements, and their respective balances |
| going concern assumption |
In the absence of evidence to the contrary, accountants assume that a business will continue to operate well into the future |
| goods available for sale |
A calculated amount corresponding to the beginning inventory plus net purchases; represents the total pool of inventory available during a period from which sales can occur |
| goods in transit |
Goods in the process of being transported to the buyer; ownership is based on freight terms |
| goodwill |
The excess of the purchase price of an acquired company over the fair value of the identifiable net assets acquired |
| gross method |
A method of recording purchases of inventory at invoice price |
| gross pay |
Also known as gross earnings; this it is the total amount earned by an employee before any deductions |
| gross profit |
A calculated amount corresponding to net sales minus cost of goods sold |
| gross profit method |
An technique that purports to estimate inventory and cost of goods sold by applying historic percentage relationships to observable sales information |
| held to maturity investments |
Investments purchased with intent to hold to maturity; usually investment in debt; accounted for by amortized cost method |
| historical cost principle |
The concept that many transactions and events are to be measured and reported at acquisition cost |
| IASB |
International Accounting Standards Board; organization undertaking to develop cohesive accounting rules with global acceptance |
| impairment |
When the carrying amount of an asset is not recoverable from its future cash flow |
| income statement |
A financial statement that summarizes the revenues, expenses, and results of operations for a specified period of time |
| income summary |
A non-financial statement account used only to facilitate the closing process by summarizing and zeroing-out the revenue and expense accounts |
| income taxes |
Taxes that are based on the amount income; for employees such amounts must be withheld by employers and remitted to the government |
| independent contractor |
One who performs a designated task or service for a company, and the company has the right to control or direct only the result of the work done |
| indirect approach |
An alternative method for preparing the statement of cash flows; operating cash flows are presented as a reconciliation of income to cash from operating activities |
| initial public offering |
The first time stock in a corporation is offered to the investing public; registration and other requirements must be met; proceeds may flow to the corporation or private shareholders |
| intangible asset |
Lack physical existence, and include items like purchased patents and copyrights |
| intangible asset |
Long-term asset that lacks physical existence; contract rights, copyrights, patents, trademarks, etc. |
| interest |
The charge imposed on the borrower of funds for the use of money |
| internal auditor |
A person within an organization who reviews and monitors the controls, procedures, and information of the organization |
| intraperiod tax allocation |
Separately reported item like discontinued operations, extraordinary items, etc., are to reported net of their specifically related tax effects |
| inventory |
Goods held for resale to others |
| investee |
The company in which another has an investment |
| investing activities |
A cash flow category; including receipts from disposal of investments and long-term assets -- and payments to acquire long-term assets and investments |
| invoice price |
List price less any trade discounts |
| issue price |
The amount a company receives in exchange for the initial issue of debt or other financial instrument |
| journal |
A chronological listing of the transactions and events of an organization, in debit/credit format |
| journalizing |
The process of recording transactions and events into the journal |
| junk bond |
A bond that is issued by a company of low credit worthiness, and entails substantial risk of nonpayment; generally offers a high interest rate to compensate for the high risk |
| land improvements |
Includes the cost of parking lots, sidewalks, landscaping, irrigation systems, and similar expenditures that are incurred to better land |
| last-in, first-out method |
LIFO; An inventory cost flow assumption based on the notion that the most recent costs are to be assigned to units sold |
| lease/lessee and lessor |
Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset |
| legal capital |
Usually the par value of the stock of a corporation |
| liabilities |
Amounts owed by an entity to others |
| liquidity |
The ability of a firm to meet its near-term obligations as they come due |
| list price |
An establish price determined by reference to a catalog or general price list; before any discounts |
| long-term investments |
Investments made for long-term holding purposes; including land for speculation, securities of other companies, etc. |
| long-term liabilities |
Any obligation that is not current, and include bank loans, mortgage notes, and the like |
| lower-of-cost-or-market |
To report inventory at the lower of its cost or market value; market is generally defined as replacement cost |
| lump-sum purchase |
A single price paid for a package of assets; the purchase price must be allocated to each of the components |
| maker |
The party creating the a note and agreeing to make payment |
| managerial accounting |
An area of accounting concerned with reporting results to managers and others who are internal to an organization |
| matching principle |
To associate expenses with revenues, and record them in simultaneous accounting periods |
| materiality |
A matter of accounting judgment; when amounts involved are slight, expediency may dictate waiving the technically correct alternative in lieu of a simpler approach |
| maturity date |
The date on which a note and related interest are due to be paid |
| maturity value |
The amount due at maturity of a note; includes principal and interest |
| Modified Accelerated Cost Recovery |
A "depreciation" approach common to the tax code; generally permits more rapid "recovery" of asset cost than GAAP approaches; MACRS - pronounced "makers" |
| modified cash basis |
Like the cash basis, except that certain large expenditures for durable assets may be recorded as assets initially |
| moving-average method |
Under the perpetual inventory system; to recompute running average cost with each purchase transaction |
| multiple-step income statement |
A complex income statement with sections that segregate cost of goods sold calculations and other components of income and expense; enables enhanced evaluations of data |
| natural business year |
Applicable to certain businesses that have a seasonal business pattern, and an attempt is made to establish an accounting fiscal year to match |
| natural resources |
Oil and gas reserves, mineral deposits, thermal energy sources, and standing timber are just a few examples of such assets that a firm may own |
| net income |
The excess of revenues over expenses for a designated period of time |
| net income |
Income from continuing operations plus/minus other special items like discontinued operations, etc., but before items of "other comprehensive income" |
| net loss |
The excess of expenses over revenues for a designated period of time |
| net method |
A method of recording purchases of inventory at invoice price less available cash discounts |
| net pay |
Also known as net earnings; this is the gross pay less all applicable deductions ("take home pay") |
| net realizable value |
The amount of cash expected to be collected on outstanding accounts receivable; accounts receivable minus the allowance for uncollectibles |
| nominal accounts |
Accounts that will be reset to a zero balance with each new accounting period; revenue, expense, and dividend accounts (also called "temporary" accounts) |
| nonredeemable bond |
A bond that cannot be paid off before scheduled maturity |
| nonrefundable bond |
A bond that cannot be paid off with the proceeds of a new debt issue |
| nontrade receivables |
Amounts due from transactions and events not directly related to sales of products or services |
| notes payable |
Formal short-term borrowings usually evidenced by a specific written promise to pay |
| notes receivable |
A written promise from a client or customer to pay a definite amount of money on a specific future date |
| NSF check |
Nonsufficient funds check; a customer check returned for lack of funds (a "hot check") |
| operating activities |
A cash flow category; generally related to transactions that enter into the determination of income -- items that are not investing or financing |
| operating cycle |
The period of time it takes to convert cash back into cash (i.e., purchase inventory, sell the inventory on account, and collect the receivable) |
| operating expenses |
General expense category for selling and administrative costs |
| operating lease |
A lease where the lessee makes periodic payments for periodic use of an asset, but does not assume the ultimate risks and rewards of owning the asset |
| other comprehensive income |
An account for changes in value of available for sale securities; not part of income from continuing operations and generally positioned as a special category within equity |
| outstanding checks |
Checks entered on company records but not yet cleared by the bank |
| owner investments |
Resources provided to an organization by a person in exchange for a position of ownership in the organization |
| owners' equity |
The residual of assets minus liabilities, representing the collective interest or position of the entity's owners |
| paid-in capital in excess of par |
The amount by which a stock's issue price exceeds its par value; also referred to as "additional paid-in capital" |
| par value on bonds |
The face or contract amount of a bond; the amount to be repaid at maturity along with any interest |
| partnership |
A non-corporation representing an association of two or more persons organized to carry out a business plan for a profit motive |
| payee |
The party to whom a note is made payable |
| PCAOB |
Public Accounting Oversight Board -- a private-sector, non-profit corporation, charged with overseeing the auditors of public companies |
| pension plan |
A general term to describe some form of arrangement for continuing payments to retirees |
| periodic inventory system |
An inventory system that utilizes a Purchases account and does not update inventory with each sale; inventory is updated by physical count at the end of accounting periods |
| periodicity assumption |
An accounting assumption that purports to divide a continuous business process into measurement intervals, such as months, quarters, and years |
| perpetual inventory system |
A "real-time" inventory system that updates inventory records with each purchase and sale |
| petty cash |
A fund established for making small payments that are impractical to pay by check; also known as imprest cash fund |
| physical inventory |
The process of counting inventory actually on hand |
| post-closing trial balance |
Reveals the balance of accounts after the closing process, and consists of balance sheet accounts only |
| posting |
The process of transferring journal entry effects into the respective general ledger accounts |
| preemptive right |
A right that may or may not be provided to shareholders enabling them with a first right of refusal to buy any additional shares offered by a corporation |
| preferred stock |
A class of stock that generally benefits from a stipulated periodic dividend and priority in liquidation; but, usually lacking in upside participation in corporate growth |
| premium on bonds |
The difference between face value and issue price of a bond, where the issue price is more; causes the effective yield to be lower than that stated |
| prepaid expenses |
Goods or services purchased in advance of their consumption |
| present value |
The calculated value today of an amount to be received in the future, based upon an assumed interest rate (the reciprocal of future value) |
| price earnings ratio |
The per share market value of a stock divided by its earnings per share |
| principal |
The basic stated amount of a note on which interest is usually calculated; generally relating to the amount borrowed |
| principles-based |
The idea that accounting standards should articulate broad-based principles rather than specific and detailed rules |
| prior period adjustment |
To correct errors from prior years; prior financial statements are retroactively changed to make them correct |
| proof of cash |
A detailed bank reconciliation that verifies not only beginning and end balances, but also validates deposits and withdrawals during the month |
| property, plant, & equipment |
Assets with long lives that will be used in an entity's production processes; land, buildings, and equipment |
| prospectus |
The documentation describing financial and business aspects of an initial public offering |
| public accounting |
Accounting activities provided by a person to the general public, typically relating to audit, tax and similar services |
| purchases discounts |
A cash discount available on purchases of merchandise on account; encourages prompt payment |
| quick ratio |
An extreme measure of liquidity, calculated by dividing quick assets (cash, short-term investments, and accounts receivable) by current liabilities |
| real accounts |
Asset, liability, and equity accounts; balances are carried forward from the end of one period into the beginning of the next period |
| registered bond |
A bond for which ownership records are maintained, and interest is paid to the registered owner |
| relevance |
A quality of accounting such that it is timely and bears on the decision-making process by possessing feedback and/or predictive value |
| reliability |
A quality of accounting information such that it is faithful in representation; free from bias, neutral, and verifiable |
| remeasurement |
One of two approaches for converting the financial statements of a foreign affiliate to the reporting currency |
| replacement |
A restoration of an asset, at least partially, to its original condition; such costs may be capitalized by reducing accumulated depreciation |
| residual value |
Amount expected be realized at the end of an asset's service life; "salvage value" |
| retail inventory method |
A inventory costing technique used by retailers that extrapolates inventory values by applying cost-to-retail percentages to known sales and purchase transactions |
| retained earnings |
The excess of a corporation's income over its dividends |
| return on assets ratio |
A ratio comparing income (net income plus interest) to the average total assets |
| return on equity ratio |
A ratio comparing income (net income minus preferred dividends) to the average total equity |
| revenue |
Inflows and other benefits received in exchange for the providing of goods and services |
| revenue expenditure |
Not a capital expenditure; to be expensed as incurred |
| revenue recognition |
The point at which revenue is recognized in the accounting records; ordinarily the point of sale |
| reversing entry |
Optional accounting procedure which may prove useful in simplifying record keeping; a journal entry to "undo" an adjusting entry |
| rules-based |
The idea that accounting standards must be very specific to provide adequate guidance and drive consistency in reporting |
| sales discounts |
A cash discount offered to customers to encourage prompt payment of invoices |
| secured bond |
A bond that provides specific assets as collateral to help assure the payment stream |
| Securities and Exchange Commission |
SEC -- regulatory body with which public companies must file and report |
| serial bond |
A bond issue that has multiple repayment dates, rather than the entire issue maturing at one fixed maturity date |
| service life |
The period of time that a depreciable asset will be in use by an entity; the time interval over which the asset will be depreciated |
| significant influence |
The ability to sway management and decision making of another entity, but generally not enough to assert absolute control |
| simple interest |
Interest calculations that do not provide for periodic inclusion of accumulated interest into the base on which interest is calculated |
| single-step income statement |
A simple income statement with a section for all revenues and another for all expenses; there is no direct association between specific revenue and expense components |
| sinking fund bond |
A bond issue that requires periodic setting aside of monies into a separate fund to provide for eventual repayment of the debt at maturity |
| sole proprietorship |
A non-corporation business owned by a sole individual |
| source document |
A document evidencing a transaction or event and potentially providing for the initiation of a journal entry |
| specific identification method |
Inventory costing method where the actual cost of each unit of merchandise is tracked and used for accounting purposes |
| stable currency assumption |
An accounting assumption that presumes the currency is not impacted over time by inflation |
| statement of cash flows |
A financial statement that summarizes the cash flows relating to operating, investing, financing, and noncash investing/financing activities of an entity |
| statement of retained earnings |
A financial statement that discloses changes in retained earnings during a designated period of time; those changes usually attributable to income and dividends |
| statement of stockholders' equity |
A financial statement that is often presented in lieu of a statement of retained earnings and other disclosures about equity accounts |
| stock |
Transferable units of ownership in a corporation |
| stock dividend |
A noncash corporate activity to provide shareholders with additional shares in proportion to existing ownership; makes for more shares outstanding, but does not change total equity |
| stock split |
A corporate action to increase the number of shares and reduce the par per share by a stipulated ratio (e.g., 2 for 1) |
| straight-line amortization |
A method for amortizing premiums and discounts on bonds; the premium or discount is spread uniformly over the life of the bond as an adjustment of interest |
| straight-line depreciation |
A simple depreciation method by which the depreciable base is spread uniformly over the service life |
| subsidiary account |
A subcomponent account record providing individual balance details; e.g., the record for one customer out of a group of customers comprising all accounts receivable |
| sum-of-the-years'-digits method |
Accelerated depreciation method where the depreciable base is spread over the asset life, with each year's portion being a unique but declining fraction tied to the overall asset life |
| SUTA |
State Unemployment Tax levied on employer to provide funds for unemployed workers; rate is adjusted for employer history of layoffs, etc. |
| T-account |
An abstract representation of an account, with the left side of the "T" representing debits and the right side credits |
| temporary accounts |
Accounts that will be reset to a zero balance with each new accounting period; revenue, expense, and dividend accounts (also called "nominal" accounts) |
| total paid-in capital |
The sum of legal capital plus paid-in capital in excess of par |
| trade discount |
A reduction from list price that is not entered in the accounting records; customarily offered in "setting" the invoice amount |
| trade receivables |
Amounts due from customers from credits sales of products or services |
| trading securities |
Investments acquired with the intent of generating profits by reselling the investment in the very near future; classified as current assets |
| translation |
One of two approaches for converting the financial statements of a foreign affiliate to the reporting currency |
| treasury stock |
Shares of a company's own stock that it has reacquired |
| trial balance |
A listing of account balances from the ledger, used to test the equality of debits and credits |
| unearned revenue |
Revenue that has been collected in advance of providing goods and services to "earn it;" reported as a liability until earned |
| units of output depreciation |
A depreciation approach where the depreciable base is allocated to the expected total units of output; mileage, hours, etc. |
| W-2 |
An annual statement provided to employees stating the amount of earnings and withholdings; assists employee in preparing their own tax returns |
| W-4 |
A form filled out by an employee stating the amount of exemptions to which they are entitled for tax purposes; such exemptions bear on the amount of income tax withholdings |
| warranty liability |
A liability that is recorded for the future costs of claims that are anticipated because of product warranty agreements |
| weighted-average inventory method |
Under the periodic inventory system; inventory cost is based on the average cost of units purchased giving consideration to the quantities purchased at different prices |
| workers compensation insurance |
Insurance paid by the employer to cover work related injuries sustained by employees |
| working capital |
The difference between current assets and current liabilities |
