Glossary
Author | Vern Krishna |
Pages | 431-496 |
Glossary
Accelerated Amortization
A method of allocating costs against income that records a greater portion
of the total cost in the earlier years of an asset’s life, and a lower portion in
later years. For example: declining balance amortization allocates more in
the earlier years than does the straight-line method.
Account
A record of an asset, liability, owners’ equity, revenue, or expense in which an
enterprise records transactions, accruals, and adjustments, generally in the
local currency of the country.
Account Aging
Usually refers to the methods of tracking past due accounts in accounts
receivable based on the dates the charges were incurred. Account aging can
also be used in accounts payable, to a lesser degree, to monitor payment
history to suppliers.
Accountant’s Opinion
A signed statement regarding the financial status of an entity from an
independent public accountant after examination of that entity’s records
and accounts.
Accounting Entity
The enterprise for which the accounting is being done. The entity may be a
single legal corporation or other organization, an economic unit without legal
standing (such as a proprietorship), or a group of corporations with con-
nected ownership for which consolidated financial statements are prepared.
Financial Skills for Professionals
Accounting Policies
The accounting methods chosen by a company to recognize economic events
on an accrual basis and to report the financial position and results of operations.
Accounting Principles
See Generally Accepted Accounting Principles (GAAP).
Accounts Payable
Liabilities representing amounts owed to short-term trade creditors. An
account payable for the debtor is an account receivable for the creditor.
Accounts Receivable
A current asset representing amounts owed by debtors (usually customers)
for services performed or merchandise sold on credit.
Accounts Receivable Financing
A secured short-term loan that involves either the assignment or factoring
of receivable.
Accretion
The adjustment of the difference between the price of a bond purchased at
an original discount and the par value of the bond.
Accrual Basis of Accounting (Accrual Accounting)
Wherein revenue and expenses are recorded in the period in which they are
earned or incurred regardless of whether cash is received or disbursed in
that period.
Accrual Income
The result of subtracting expenses from revenue(s) when both kinds of
accounts are calculated by accrual accounting.
Accrued Assets
Assets from revenues earned but not yet received.
Accrued Expenses
Expenses incurred during an accounting period for which payment is
postponed.
Accrued Income
Income earned during a fiscal period but not paid by the end of the period.
Accrued Interest
Interest earned but not yet received.
Accrued Liability
Liabilities that are incurred, but for which payment is not yet made, during a
given accounting period.
Glossary
Accumulated Amortization
The cumulative charges against the intangible assets of a company over the
expected useful life of the assets.
Accumulated Amortization (Depreciation)
A balance sheet account that accumulates total amortization expense (for intan-
gible assets) or depreciation expense (for fixed assets) over a number of years.
Accumulated Depreciation
The cumulative charges against the fixed assets of a company for wear and
tear or obsolescence.
Acid-Test Ratio
See Quick Ratio.
Acquisition
One company taking over controlling interest in another company.
Adjusted Present Value (APV)
Base case net present value of a project’s operating cash flows plus present
value of any financing benefits.
Adjusted Trial Balance
The list of accounts prepared after all the accrual accounting adjustments
and corrections have been made and so representing the final account bal-
ances used in preparing the financial statements.
Allocating, Allocation
Spreading the impact of an event out over time, as in amortization of an
asset’s cost over its useful life or recognition of revenue for a long-term con-
tract over several periods.
Allowance for Doubtful Accounts
The estimated amount of accounts receivable that will not be collected
(which are “doubtful”). The allowance, which is a contra account to accounts
receivable, is used in order to recognize the bad debts expense related to
such doubtful accounts but without removing those accounts from the
books because the firm will still try to collect the amounts owing.
Alpha
The measurement of returns from an investment in excess of market returns.
It represents the amount expected from fundamental causes, e.g., the
growth rate in earnings per share.
Amalgamations
Combinations of firms that have been joined by merger, consolidation, or
acquisition.
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