Assets = Liabilities + Shareholders' Equity.
The second private sector body delegated the task of setting account ing standards.
Storage areas used to keep track or how transactions and events cause increases and decreases in the balances or financial clements.
Obligations to suppliers or merchandise or of services purchased on account.
Amounts to be received from the sale of goods or services on account.
Calculating the necessary allowance for uncollectible accounts by applying different percentages to accounts receivable balances depending on the length of time outstanding.
The increase in an asset retirement obligation that accrues as an operating expense.
Measures income according to the entity's accomplishments and resource sacrifices during the period from transactions related to providing goods anti services to customers, regardless of when cash is received or paid.
When the cash flow comes after either expense or revenue recognition.
Interest that has accrued s ince the last interest date.
Expenses already incurred but not yet paid (accrued expenses).
Recognition of revenue for goods or services transferred to customers before cash is received.
The discounted present value of estimated retirement benefits earned so far by employees, applying the plan's pension formula using existing compensation levels.
A component of shareholders' equity that reports the accumulated amount of other comprehensive income items in the current and prior periods.
Measure of a company's liquidity: computed as current assets, exclud ing inventories and prepaid items, divided by current liabilities.
The amounts paid to acquire the rights to explore for undiscovered natural resources or to cxtrnct proven natural resources.
Allocates an asset's cost base using a measure of the asset's input or output.
A professional trained in a particular branch of statistics and mathematics to assess the various uncertainties and to estimate the company's obligation to employees in connection with its pension plan.
The adding of a new major component to an existing asset.
Trial balance after adjusting entries have been recorded.
Internal transactions recorded at the end of any period when financial statements are prepared.
Payment made at the beginning or the lease that represents prepaid rent
Facilitates transfers of goods and services between sellers and customers.
Cost of the asset expected to be consumed during its service life.
The pattern in which the allocat ion base is expected to be consumed.
Contra account that reduces accounts receivable to the net amount expected to be collected. Also called the allowance for bad debts. the allowance for doubtful accounts, or the allowance for credit losses.
Recording bad debt expense and reducing accounts receivable indirectly by crediti ng the allowance for uncollcctible accounts, a contra account to accounts receivable. for an estimate of the amount that eventually will prove uncollectible.
National organization of professional public accountants.
Allocation for intangibles.
Annual bonuses are one-time payments in addi tion to normal salary. typically tied to performance of the individual or company during a period
Cash flows received or paid in the same amount each period.
Cash flows occurring at the beginning of each period.
The effect of the conversion or exercise of potential common shares would be to increase, rather than decrease, EPS.
Statement of the nature or the firm's business activities. the shares to be issued, and the composition of the initial board or directors.
Obligations associated with the disposition of an operational asset.
Measure of a company"s efficiency in using assets to generate revenue: computed as net sales divided by average total assets.
Recognition and measurement of assets and liabilities drives revenue and expense recognition.
Using rcceivables as collateral for loans; nonpayment of a debt will require the proceeds from collecting the assigned receivables to go directly toward repayment of the debt.
Report issued by CPAs who audit the financial statements that in forms users of the audit findings.
Independent professionals who render an opinion about whether the financial statements fairly present the company's financial position, performance. and cash flows in compliance with GAAP.
Indication of the number of clays the average accounts receivable balance is outstanding.
Assumes cost of goods sold and ending inventory consist of a mixture of all the goods available for sale.
Indicates the average number of days it normally takes to sell inventory.
A financial statement that presents an organized list of assets, liabilities, and equity at a particular point in time.
Determining an income statement amount by estimating the appropriate carrying value of a balance sheet account and then adjusting the account as necessary to reach that carrying value.
Comparison of the bank balance with the balance in the company's own records.
Computed by dividing income available to common shareholders (net income less any preferred stock dividends) by the weighted-average number of common shares outstanding for the period.
Occurs when a customer purchases goods but requests that the seller retain physical possession of the goods until a later date.
Contra account to the asset construction in progress recognizing that a customer has been billed for work performed; subtracted from construction in progress to determine balance sheet presentation.
Establishes corporate policies and appoints officers who manage the corporation.
Document that describes specific promises made to bondholders.
A form of debt consisting of separable units (bonds) that obligates the issuing corporation to repay a stated amount at a specified maturity date and to pay interest to bondholders between the issue date and maturity.
Assets minus liabilities as shown in the balance sheet.
Allows the issuing company to buy back, or call, outstanding bonds from the bondholders before their scheduled maturity date.
The process of evaluating the purchase of operational assets.
Mechanisms that foster the allocation of resources efficiently.
The mixture of liabilities and shareholders' equity in a company.
Currency and coins, balances in checking accounts, and items acceptable for deposit in these accounts, such as checks and money orders received from customers.
Journal record of cash disbursements.
Short-term investments that have a maturity date no longer than three months from the date of purchase.
A derivative used to hedge against the exposure to changes in cash inflows or outflows of an asset or liability or a forecasted transaction.
Both inflows and outflows of cash resulting from the external financing of a business.
Both outflows and inflows of cash caused by the acquisition and disposition of assets.
Both inflows and outflows of cash that result from activities reported on the income statement.
Journal record of cash receipts.
A determinable amount of money that can be received in exchange for surrendering a life insurance policy while the insured is still alive.
Measures income as the difference between cash receipts and cash disbursements during a reporting period from transactions related to providing goods and services to customers.
Licensed individuals who can represent that the financial statements have been audited in accordance with generally accepted auditing standards.
A change in an estimate when new information comes to light.
Switch by a company from one accounting method to another.
Presentation of consolidated financial statements in place of statements of individual companies, or a change in the specific companies that constitute the group for which consolidated or combined statements are prepared.
Transfer the balances of temporary accounts to the retained earnings account and reduce the balances of temporary accounts to zero.
The temporary accounts are reduced to zero balances, and these temporary account balances are closed (transferred) to retained earnings to reflect the changes that have occurred in that account during the period.
Unsecured notes sold in minimum denominations of $25,000 with maturities ranging from 30 to 270 days.
First private sector body that was delegated the task of setting accounting standards.
The ability to help users sec similarities and differences among events and conditions.
Corresponding financial statements from the previous years accompanying the issued financial statements.
Specified balance (usually some percentage of the committed amount) a borrower of a loan is asked to maintain in a low-interest or noninterest-bearing account at the bank.
Depiction is complete if it includes all information necessary for faithful representation.
Potential common shares are outstanding.
Physically dissimilar assets are aggregated to gain the convenience of group depreciation.
Interest computed not only on the initial investment but also on the accumulated interest in previous periods.
Change in shareholders' equity for the period from nonowner sources; equal to net income plus other comprehensive income. Traditional net income plus other nonowner changes in equity.
Deals with theoretical and conceptual issues and provides an underlying structure for current and future accounting and reporting standards.
Confirmation of investor expectations about future cash-generating ability.
Practice followed in an attempt to ensure that uncertainties and risks inherent in business situations are adequately considered.
A selling arrangement whereby the consignor physically transfers goods to another company ("consignee") to sell, while legal title and risk of ownership of those goods remain with the consignor during the consignment period.
Permits valid comparisons between different periods.
Combination of the separate financial statements of the parent and subsidiary each period into a single aggregate set of financial statements, as if there were only one company.
Asset account equivalent to the asset work-in-process inventory in a manufacturing company.
Additional shares of common stock to be issued contingent on the occurrence of some future circumstance.
An agreement that creates legally enforceable rights and obligations. Contracts can be explicit or implicit.
Asset asset recognizing that a seller has a conditional right to receive payment after satisfying a performance obligation.
A label given to deferred revenue or unearned revenue accounts.
Usually an investor can control the investee if it owns more than 50% of the investee's voting shares.
Application of the retail inventory method that excludes markdowns in the calculation of the cost-to-retail percentage, as a way to approximate the lower of average cost or market.
Bonds for which bondholders have the option to convert the bonds into shares of stock.
Exclusive right of protection given to a creator of a published work, such as a song, painting, photograph, or book.
Dominant form of business organization that acquires capital from investors in exchange for ownership interest and from creditors by borrowing.
An adjustment a company makes due to an error made and later discovered.
The perceived benefit of increased decision usefulness exceeds the anticipated cost of providing that information.
Cost of the inventory sold during the period.
Deferral of all gross profit recognition until the cost of the item sold has been recovered.
Ratio found by dividing goods available for sale at cost by goods available for sale at retail.
Bonds name of the owner was not registered; the holder actually clipped an attached coupon and redeemed it in accordance with instructions on the indenture.
Losses due to failure by customers to pay amounts owed for purchase of goods or services; also called bad debts, impairments of receivables, and uncollectible accounts.
Represent the right side of the account.
If the specified dividend is not paid in a given year, the unpaid dividends accumulate and must be made up in a later dividend year before any dividends are paid on common shares.
Includes assets that are cao;h, will be converted into cash, or will be used up within one year from the balance sheet date (or operating cycle, if longer).
Are the costs that would be incurred to purchase or reproduce an asset.
A model used to estimate credit losses (bad debts) for receivables as well as those debt investments that are accounted for as held to maturity or as available for sale.
Expected to require the use of current assets for payment, and usually are payable within one year from the balance sheet date (or operating cycle, if longer).
The portion of long-term notes, loans, mortgages, and bonds payable that is payable within the next year (or operating cycle, if longer), reported as a current liability.
Measure of a company's liquidity; computed as current assets divided by current liabilities.
Specific date stated as to when the determination will be made of the recipient of the dividend.
Backed only by the "full faith and credit" of the issuing corporation.
Represent the left side of the account.
Costs of issuing debt securities are called debt issue costs and are accounted for the same way as bond discount.
Compares resources provided by creditors with resources provided by owners; computed as total liabilities divided by shareholders' equity.
The quality of being useful to decision making.
A company's ability to pay its obligations when they come due.
First cash flow occurs more than the one period after the date the agreement begins.
Cash received from a customer for goods or services to be provided in a future period.
Taxes to be saved in the future when future deductible amounts reduce taxable income (when the temporary differences reverse).
Taxes to be paid in the future when future taxable amounts become taxable (when the temporary differences reverse).
Debit balance in retained earnings.
Fixed retirement benefits defined by a designated formula, based on employees' years of service and annual compensation.
Fixed annual contributions to a pension fund; employees choose where funds are invested-usually stocks or fixed-income securities.
Allocation of the cost of natural resources.
Cost allocation for plant and equipment.
Financial instruments usually created to hedge against risks created by other financial instruments or by transactions that have yet to occur but are anticipated and that "derive" their values or contractually required cash flows from some other security or index.
The investor has the option to purchase a stated number of shares of common stock at a specified option price, within a given period of time.
Costs incurred after the resource has been discovered but before production begins.
Incorporates the dilutive (reducing) effect of all potential common shares in the calculation of EPS.
Lease in which the lessor finances the asset for the lessee and earns interest revenue over the lease term.
Cash effect of each operating activity (i.e., income statement item) is reported directly on the statement of cash flows.
An allowance for uncollectible accounts is not used; instead bad debts that do arise are written off as bad debt expense.
Including pertinent information in the financial statements and accompanying notes.
Additional insights about company operations, accounting principles, contractual agreements, and pending litigation written in notes that accompany the financial statements.
The discontinuance of a component of an entity whose operations and cash flows can be clearly distinguished from the rest of the entity.
Arises when bonds are sold for less than face amount.
The transfer of a note receivable to a financial institution.
A good or service is distinct if it is both capable of being distinct and separately identifiable from other goods or serl'ices in the contract. It is capable of being distinct if the customer could use the good or service on its own or in combination with other goods and services it could obtain elsewhere. It is separately identifiable if the good or service is distinct in the context of the contract because it is not highly interrelated with other goods and services in the contract. Distinct goods and services are accounted for as separate performance obligations.
Distribution to shareholders of a portion of assets earned.
An inventory costing method comprising layers of dollar value from different periods and using cost indexes to adjust for changes in price levels over time.
LIFO retail method combined with dollar-value LIFO.
200% of the straight-line rate is multiplied by book value.
Dual effect that each transaction has on the accounting equation when recorded.
Depicts return on equity as determined by profit margin (representing profitability), asset turnover (representing efficiency), and the equity multiplier (representing leverage).
Debt is retired prior to its scheduled maturity date.
The amount of income earned by a company expressed on a per share basis.
Refers to the ability of reported earnings (income) to predict a company's future earnings.
Assumption presumes that economic events can be identified specifically with an economic entity.
Events that directly affect the financial position of the company.
Calculates interest revenue by multiplying the outstanding balance of the investment by the relevant interest rate.
The actual rate at which money grows per year.
Equals tax expense divided by pretax accounting income.
Responsible for providing timely responses to emerging financial reporting issues.
Permit all employees to buy shares directly from their company, often at favorable terms.
Used when an investor can't control, but can significantly influence, the investee. Under the equity method, the investor recognizes in its own income statement its proportionate share of the investee's income.
Predictions of future events.
A code or moral system that provides criteria for evaluating right and wrong.
Usually one business day before the date of record, and is the first day the stock trades without the right to receive the declared dividend.
Adjusts the cash flows, not the discount rate, for the uncertainty or risk of those cash flows.
Estimated long-term return on invested assets.
Outflows or other using up of assets or incurrences of liabilities from delivering or producing goods, rendering-services, or other activities that constitute the entity's ongoing operations.
For natural resources, expenditures such as drilling a well, or excavating a mine, or any other costs of searching for natural resources.
Additional, extended service that covers new problems arising after the buyer takes control of the product.
Exchanges between the company and separate economic entities.
Legal title to the goods does not pass from the seller to the buyer until the goods arrive at their destination (the customer's location); the seller is responsible for shipping costs and transit insurance.
Legal title to the goods passes from the seller to the buyer at the point of shipment (when the seller delivers the goods to the common carrier); the buyer is responsible for shipping costs and transit insurance .
Financial institution that buys receivables for cash, handles the billing and collection of the receivables, and charges a fee for this service.
Bases measurements on the price that would be received to sell assets or transfer liabilities in an orderly market transaction.
A derivative is used to hedge against the exposure to changes in the fair value of an asset or liability or a firm commitment.
Allows companies to report specified financial assets and liabilities at fair value.
Exists when there is agreement between a measure or description and the phenomenon it purports to represent.
Lessee has, in substance, purchased the lease asset; assumed when one of five classification criteria is met.
Provides relevant financial information to various external users.
Responsible for selecting the members of the FASB and its Advisory Council, ensuring adequate funding of FASB activities, and exercising general oversight of the FASB's activities.
The current private sector body that has been delegated the task of setting accounting standards.
Cash; evidence of an ownership interest in an entity; a contract that imposes on one entity an obligation to deliver cash or another financial instrument, and conveys to the second entity a right to receive cash or another financial instrument; and a contract that imposes on one entity an obligation to exchange financial instruments on potentially unfavorable terms and conveys to a second entity a right to exchange other financial instruments on potentially favorable terms.
By earning a return on borrowed funds that exceeds the cost of borrowing the funds, a company can provide its shareholders with a total return higher than it could achieve by employing equity funds alone.
Process of providing financial statement information to external users.
Primary means of communicating financial information to external parties.
Involve cash inflows and outflows from transactions with creditors (excluding trade creditors) and owners.
Products that have been completed in the manufacturing process but have not yet been sold.
Assumes that the first inventory units purchased are the first ones sold.
The effectiveness of managers to use fixed assets to generate sales, measured as net sales divided by average fixed assets.
Agreement that requires the seller to deliver a specific foreign currency at a designated future date at a specific price.
A derivative is used to offset the risk that changes in foreign currency exchange rates will affect the entity's positions, operations, or transactions that are denominated in a currency other than the its functional currency.
Calls for delivery on a specific date; is not traded on a market exchange; does not call for a daily cash settlement for price changes in the underlying contract.
Contractual arrangement under which the franchisor grants the franchisee the exclusive right to use the franchisor's trademark or tradename within a geographical area, usually for a specified period of time.
Individual or corporation given the right to operate a business involving the franchisor's products or services and use its name and other symbols for a specific period of time.
Grants to the franchisee the right to operate a business involving the franchisor's products or services and use its name and other symbols for a specific period of time.
An intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception that results in a misstatement in the financial statements that are the subject of an audit.
The cash left over after a company pays for its operating expenses and capital expenditures, often measured as cash flow from operations minus capital expenditures.
Information is free from error if it contains no errors or omissions.
Transportation-in; in a periodic system, freight costs generally are added to this temporary account, which is added to purchases in determining net purchases.
Allows costs incurred in searching for oil and gas within a large geographical area to be capitalized as assets and expensed in the future as oil and gas from the successful wells are removed from that area.
Financial reports should include any information that could affect the decisions made by external users.
Has significant stand-alone functionality, such that the intellectual property can perform a function or task, be played, or be aired over various types of media; the seller typically recognizes revenue at the point in time the customer can start using functional intellectual property.
The future tax consequence of a tempordy difference will be to decrease taxable income relative to accounting income; result in recognition of deferred tax assets.
The future tax consequence of temporary difference will be to increase taxable income relative to accounting income; result in recognition of deferred tax liabilities.
Amount of money that a dollar will grow to at some point in the future.
Agreement traded on an organized exchange; calls for delivery of a specific commodity or financial instrument at a predetermined price on a specific date or during a specific month.
Increases in equity from peripheral, or incidental, transactions of an entity.
Used to record any type of transaction.
Collection of accounts that organizes the accounts and allows for keeping track of increases and decreases and resulting balances
Set of both broad and specific guidelines that companies should follow when measuring and reporting the information in their financial statements and related notes.
Transferable prepayments for a specified dollar value of goods or services to be delivered at a future date. Gift cards give rise to deferred revenue liabilities until they are redeemed or viewed as not going to be redeemed (broken).
In the absence of information to the contrary, it is anticipated that a business entity will continue to openite indefinitely.
Intangible asset equal to the fair value of the consideration given to acquire a company (the acquisition price) minus the fair value of the acquired company's identifiable net assets.
Responsible for developing accounting standards for governmental units such as states and cities.
The buyer views a discount not taken as part of the cost of inventory; the seller views a discount not taken by the customer as part of sales of revenue.
Estimates cost of goods sold, which is then subtracted from cost of goods available for sale to estimate ending inventory.
Gross profit (net sales minus cost of goods sold) divided by net sales.
Collection of assets defined as depreciable assets that share similar service lives and other attributes.
Record one-half of a full year's depreciation in the year of acquisition and another half year in the year of disposal.
Taking an action that is expected to produce exposure to a particular type of risk that is opposite of an actual risk to which the company already is exposed.
Original transaction value.
Comparison by expressing each item as a percentage of that same item in the financial statements of another year (base amount) in order to more easily see year-to-year changes.
Violations of the law, such as bribes, kickbacks, and illegal contributions to political candidates.
Rate implicit in the agreement.
Replacement of a major component of an operational asset.
Revenues, expenses (including income taxes), gains, and losses, excluding those related to discontinued operations and extraordinary items.
Statement of operations or statement of earnings that is used to summarize the profit-generating activities that occurred during a particular reporting period.
Estimating an income statement amount directly, rather than basing it on the change in a balance sheet account.
The net cash increase or decrease from operating activities is derived indirectly by starting with reported net income and working backwards to convert that amount to a cash basis.
Costs incurred by the lessor that are associated directly with originating a lease and are essential to acquire the lease.
Recognizes revenue and costs only when cash payments are received.
National organization of accountants providing internal auditing services for their own organizations.
Primary national organization of accountants working in industry and government.
Operational assets that lack physical substance and often involve an exclusive right to a company to provide a product or service; examples include patents, copyrights, franchises, and goodwill.
"Rent" paid for the use of money for some period of time.
Interest accrued on the projected benefit obligation calculated as the discount rate multiplied by the projected benefit obligation at the beginning of the year.
Agreement to exchange fixed interest payments for floating rate payments, or vice versa, without exchanging the underlying principal amounts.
Notes that state a principal and interest rate to be paid by a debtor to a creditor.
A company's system to encourage adherence to company policies and procedures, promote operational efficiency, minimize errors and theft, and enhance the reliability and accuracy of accounting data.
Events that directly affect the financial position of the company but don't involve an exchange transaction with another entity.
Objectives are to develop a single set of high-quality, understandable global accounting standards, to promote the use of those standards. and to bring about the convergence of national accounting standards and International Accounting Standards.
Umbrella organization formed to develop global accounting standards.
Developed by the IASB and used by more than 100 countries.
Difference between the market price of the shares and the option price at which they can be acquired.
Goods awaiting sale (finished goods), goods in the course of production (work in process), and goods to be consumed directly or indirectly in production (raw materials). Goods acquired, manufactured, or in the process of being manufactured for sale.
Measures a company's efficiency in managing its investment in inventory; computed as cost of goods sold divided by average inventory.
Involve the acquisition and sale of long-term assets used in the business and nonoperating investment assets.
A chronological record of all economic events affecting the financial position of a company.
Captures the effect of a transaction on financial position in debit/credit form.
A system used by a manufacturer to coordinate production with suppliers so that raw materials or components arrive just as they are needed in the production process.
The cost of parking lots, driveways, and private roads and the costs of fences and lawn and garden sprinkler systems.
Assumes that the last inventory units purchased are the first ones sold.
Payments the lessee is required to make in connection with the lease.
Account title when a lessee makes improvements to leased property that reverts back to the lessor at the end of the lease.
User of a leased asset.
Owner of a leased asset.
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.
Allow the customer to access the seller's intellectual property.
If a company uses LIFO to measure taxable income, the company also must use LIFO for external financial reporting.
Groups of inventory units based on physical similarities of the individual units.
The decline in inventory quantity during the period.
Contra account to inventory used to record the difference between the internal method and LIFO.
Owners are not liable for the debts of the business, except to the extent of their investment; all members can be involved with managing the business without losing liability protection; no limitations on the number of owners.
Similar to a limited liability company, except it doesn't offer all the liability protection available in the limited liability company structure.
Allows a company to borrow cash without having to follow formal loan procedures and paperwork.
When a dividend exceeds the balance in retained earnings and returns invested capital to owners
The ability of a company to convert its assets to cash to pay its current liabilities.
An assessment of whether a company will be able to pay all its liabilities, which includes long-term liabilities.
Existing, uncertain situation involving potential loss which will be resolved when some future event occurs.
Decreases in equity from peripheral, or incidental, transactions of the entity.
Subsequent measurement of inventory applied by companies that use LIFO or the retail inventory method. This approach requires companies to report ending inventory at the lower of cost or market.
Subsequent measurement of inventory applied by companies that use FIFO, average cost, or any other method besides LIFO or the retail inventory method. This approach requires companies to report ending inventory at the lower of cost or net realizable value.
Provides a biased but informed perspective of a company's operations, liquidity, and capital resources.
Current replacement cost of inventory, not to exceed net realizable value (NRV) or to be lower than NRV minus a normal profit margin.
Has qualitative or quantitative characteristics that make it matter for decision making.
Process of associating numerical amounts with the elements.
Designed to serve as a guide to states in the development of their corporation statutes.
Federal income tax code allows taxpayers to compute depreciation for their tax returns using this method.
Accounting change is applied only to the adoption period with adjustment of the balance of retained earnings at the beginning of the adoption period to capture the cumulative effects of prior periods.
Money and claims to receive money, the amount of which is fixed or determinable.
Obligations to pay amounts of cash, the amount of which is fixed or determinable.
States that financial statement elements should be measured in a particular monetary unit (in the United States, the U.S. dollar).
Backed by a lien on specified real estate owned by the issuer.
Format that includes a number of intermediate subtotals before arriving at income from continuing operations.
Oil and gas deposits, timber tracts, and mineral deposits.
All revenues and gains minus all expenses and losses reported in the income statement.
Net effect of the change in selling price (increase, decrease, increase).
Net effect of the change in selling price (increase, increase, decrease).
The buyer considers the cost of inventory to include the net, after-discount amount, and any discounts not taken are reported as interest expense; the seller considers sales revenue to be the net amount, after discount, and any discounts not taken by the customer are included in sales revenue.
Difference between cash receipts and cash disbursements from providing goods and services.
Negative taxable income because tax-deductible expenses exceed taxable revenues.
Offsets future taxable income with an NOL to provide a reduction of taxes payable in that future period; therefore, gives rise to a deferred tax asset because it is a future deductible amount.
Estimated selling prices of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Implies freedom from bias.
Actual (GAAP) earnings reduced by any expenses the reporting company feels are unusual and should be excluded.
Transactions that do not increase or decrease cash but that result in significant investing and financing activities.
If the specified dividend is not declared in any given year, it need never be paid.
Notes for which the interest is deducted from the face amount of the note to determine the cash proceeds made available to the borrower at the outset.
Includes revenues, expenses, gains, and losses related to peripheral or incidental activities of the company.
Preferred shareholder dividends are limited to the stated amount.
Promissory notes (essentially an IOU) that obligate the issuing corporation to repay a stated amount at or by a specified maturity date and to pay interest to the lender between the issue date and maturity.
Receivables supported by a formal agreement or note that specifies payment terms.
Approach to standard setting stresses professional judgment, as opposed to following a list of rules.
Inflows and outflows of cash related to transactions entering into the determination of net income.
Period of time necessary to convert cash to raw materials, raw materials to finished product, the finished product to receivables, and then finally receivables back to cash.
Includes revenues, expenses, gains, and losses directly related to the principal revenue-generating activities of the company.
Fundamental rights and responsibilities of ownership are retained by the lessor and the lessee merely is using the asset temporarily.
A component of an enterprise that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other companies of the same enterprise); whose operating results are regularly reviewed by the enterprise's chief opemting decision maker to make decisions about resources to be allocated to the segment and assess its performance; for which discrete financial information is available.
How adept a company is at withstanding various event,; and circumstances that might impair its ability to earn profits.
Gives the holder the right either to buy or sell a financial instrument at a specified price.
Statistical models that incorpornte information about a company's stock and the terms of the stock option to estimate the option's fair value.
Cash flows occur at the end of each period.
Costs related to organizing a new entity, such as legal fees and state filing fees to incorporate.
Changes in shareholders' equity other than transactions with owners and other than items that aftect net income.
Invested capital consisting primarily of amounts invested by shareholders when they purchase shares of stock from the corporation.
Supplemental information disclosed on the face of financial statements.
Preferred shareholders are allowed to receive additional dividends beyond the stated amount.
Exclusive right to manufacture a product or to use a process.
A fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments.
Employer contributions and accumulated earnings on the investment of those contributions to be used to pay retirement benefits to retired employees.
Promises to transfer goods and services to a customer; they arc satisfied when the seller transfers control of goods or services to the customer.
A system of accounting for inventory that involves an adjusting entry at the end of the period to update the balances of the inventory account and the cost of goods sold account for purchases, sales, and returns during the period.
Assumption allows the life of a company to be divided into artificial time periods to provide timely information.
Represent assets, liabilities. and shareholders' equity at a point in time.
Difference between pretax accounting income and taxable income and, consequently, between the reported amount of an asset or liability in the financial statements and its tax basis that will not "reverse" resulting from transactions and events that under existing tax law will never affect taxable income or taxes payable.
A system of accounting for inventory by continuously adjusting the balance of the inventory account for each purchase, sale. or return of inventory; the cost of goods sold account is adjusted for each sale or return of inventory by customers.
A promise to relinquish control of an asset (or assets) in payment (or partial payment) of an amount due.
List of all permanent accounts and their balances after closing entries have been recorded.
Transferring debits and credits recorded in individual journal entries to the specific accounts affected.
Securities that, while not being common stock, may become common stock through their exercise, conversion, or issuance and therefore dilute (reduce) earnings per share.
Confirmation of investor expectations about future cash-generating ability.
Typically has a preference (a) to a specified amount of dividends (stated dollar amount per share or percentage of par value per share) and (b) to distribution of assets in the event the corporation is dissolved.
Arises when bonds are sold for more than face amount.
Costs of assets acquired in one period and expensed in a future period.
The cash flow precedes either expense or revenue recognition.
Present value is today's equivalent of a particular amount in the future. after backing out the time value of money.
Controls goods or services and is responsible for providing them to the customer.
Addition to or reduction in the beginning retained earnings balance in a statement of shareholders' equity due to a correction of an error in a prior period.
The cost of credit given for an amendment to a pension plan to employee service rendered in prior years.
Costs associated with products and expensed as cost of goods sold only when the related products are sold.
Net income divided by net sales; measures the amount of net income achieved per sales dollar.
The discounted present value of estimated retirement benefits earned so far by employees, applying the plan's pension formula using projected future compensation levels.
When a noncash asset is distributed.
Tangible, long-lived assets used in the operations of the business, such as land, buildings. equipment, machinery, furniture, and vehicles, as well as natural resources, such as mineral mines, timber tracts, and oil wells.
Effects of an accounting change are reflected in the financial statements of only the year of the change and future years.
Contains disclosures on compensation to directors and executives; sent to all shareholders each year.
Contracts that obligate a company to purchase a specified amount of inventory or raw materials at specified prices on or before specified dates.
Reductions in the amount to be paid if remittance is made within a designated period of time.
A provision of some lease contracts that gives the lessee the option of purchasing the leased property during, or at the end of, the lease term at a specified price.
A reduction in both inventory and accounts payable (if the account has not yet been paid) at the time of the return.
Journal records the purchase of inventory on account.
Obligation by the seller to make repairs or replace products that are later demonstrated to be defective for some period of time after the sale.
A firm undergoing financial difficulties, but with favorable future prospects, may use a quasi reorganization to write down inflated asset values and eliminate an accumulated deficit.
(Dividends + Share price appreciation) ÷ (Initial investment)
Comparison of accounting numbers to evaluate the performance and risk of a firm.
Components purchased from suppliers that will become part of the finished product.
Bases revenue recognition on completion of the earnings process and reasonable certainty about collectibility.
Expenditures made to restructure an asset without addition, replacement, or improvement.
A company's claims to the future collection of cash, other assets, or services.
Indicates how quickly a company is able to collect its accounts receivable; computed as net sales divided by average accounts receivable (net).
Process of admitting information into the basic financial statements.
Privilege might allow preferred shareholders the option, under specified conditions, to return their shares for a predetermined redemption price.
Amount the seller estimates will be refunded to customers who make returns.
Transactions with owners, management, families of owners or management, affiliated companies, and other parties that can significantly influence or be influenced by the company.
One of the primary decision-specific qualities that make accounting information useful; made up of predictive value and/or feedback value and timeliness.
Depreciation method depreciation is recorded when assets are replaced.
Asset carrying amount of a leased asset not transferred to the lessee.
The amount the company expects to receive for the asset at the end of its service life less any anticipated disposal costs.
Costs to restore land or other property to its original condition after extraction of the natural resource ends.
Shares issued in the name of the employee, subject to forfeiture by the employee if employment is terminated within some specified number of years from the date of grant.
Right to receive shares, subject to forfeiture by the employee if employment is terminated within some specified number of years from the date of grant.
Costs associated with plans by management to materially change either the scope or manner in which its company's operations are conducted.
Amounts earned by the corporation on behalf of its shareholders and not (yet) distributed to them as dividends.
Repurchased and not designated as treasury stock, assuming the same status as authorized but unissued shares, as if never issued.
Depreciation method records depreciation when assets are disposed of and measures depreciation as the difference between the proceeds received and cost.
Financial statements issued in previous years are revised to renect the impact of an accounting change whenever those statements are presented again for comparative purpose.
A company's profitability in relation to overall resources, measured as net income divided by average total assets.
Amount of profit management can generate from shareholders' equity, mem;ured as net income divided by average shareholders' equity.
Recognition and measurement of revenues and expenses are emphasized; with balance sheet accounts adjusted as necessary to reflect revenues and expenses.
Inflows of assets or settlements of liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.
When a company decreases, rather than increases, its outstanding shares.
Optional entries that remove the effects of some of the adjusting entries made at the end of the previous reporting period for the sole purpose of simplifying journal entries made during the new period.
Shareholders' right to exchange shares of preferred stock for common stock at specified conversion ratio.
Customers' right to return merchandise to retailers if they are not satisfied.
A list of rules for choosing the appropriate accounting treatment for a transaction.
Has characteristics of both regular corporations and partnerships.
The owner of an asset sells it and immediately leases it back from the new owner.
Cash discounts; represent reductions not in the selling price of a good or service but in the amount to be received from a credit customer if the amount is paid within a specific period of time.
Records credit sales.
The return of merchandise for a refund or for credit to be applied to other purchases.
Lessor transfers control of lease asset to lessee, with or without a selling profit on the sale of the asset.
Has the authority to set accounting standards for companies, but it relies on the private sector to do so.
Debt securities the investor acquires for purposes other than active trading or to be held to maturity.
Debt securities for which the investor has the "positive intent and ability" to hold the securities to maturity.
The company creates a special purpose entity (SPE), usually a trust or a subsidiary; the SPE buys a pool of trade receivables, credit card receivables, or loans from the company and then sells related securities.
When the fair value of the asset (usually the present value of the lease payments, or "selling price") exceeds the cost or carrying value of the asset sold.
An internal control technique in which various functions are distributed amongst employees to provide cross-checking that encourages accuracy and discourages fraud.
More structured (and less popular) way to retire bonds on a piecemeal basis.
Increase in the projected benefit obligation attributable to employee service performed during the period.
The estimated use that the company expects to receive from the asset.
Allocation approach that reflects the declining service pattern of the prior service cost.
Investments not classified as cash equivalents that the company has the ability and intent to sell within one year (or operating cycle if longer).
Effective control is absent but the investor is able to affect the operating and financial policies of the investee (usually is the case when investor holds between 20% and 50% of the investee's voting shares).
A firm that has no potential common shares (outstanding securities that could potentially dilute earnings per share).
Computed by multiplying an initial investment times both the applicable interest rate and the period of time for which the money is used.
Format that groups all revenues and gains together and all expenses and losses together.
Bonds that must be redeemed on a prespecified year-by-year basis; administered by a trustee who repurchases bonds in the open market.
Relay essential information about each transaction to the accountant, e.g., sales invoices, bills from suppliers. cash register tapes.
Record of a repetitive type of transaction, e.g., a sales journal.
Each unit of inventory sold during the period or each unit on hand at the end of the period is matched with its actual cost.
For interest capitalization, rates from specific construction loans to the extent of specific borrowings are used before using the average rate of other debt.
The amount at which the good or service is sold separately under similar circumstances.
Whenever a company introduces a new product or service, or commences business in a new territory or with a new customer. it incurs one-time costs that are expensed in the period incurred.
Statement summarizing the transactions that caused cash to change during the period.
Statement disclosing the source of changes in the shareholders' equity accounts during the period.
Awards that enable an employee to benefit by the amount that the market price of the company's stock rises above a specified amount, without having to buy shares.
Distribution of additional shares of stock to current shareholders of the corporation.
Employees aren't actually awarded shares, but rather are given the option to buy shares at a specified exercise price within some specified number of years from the date of grant.
Stock distribution of 25% or higher, sometimes called a large stock dividend.
Recording interest each period at the same dollar amount.
Allocation of an equal amount to each year. For depreciation of plant and equipment or amortization of intangible assets, an equal amount of the allocation base is allocated to each year of the asset's service life.
The holder is not entitled to receive any liquidation payments until the claims of other specified debt issues are satisfied.
A significant development that takes place after the company's fiscal year-end but before the financial statements are issued.
Record of a group of subsidiary accounts associated with a particular general ledger control account.
Requires that exploration costs that are known not to have resulted in the discovery of oil or gas be included as expense in the period the expenditures are made.
Systematic acceleration of depreciation by multiplying the depreciable base by a fraction that declines each year.
Reports containing more detailed information than is shown in the primary financial statements.
Has usefulness to the customer that depends on the seller's ongoing activities, so it transfers a right of access; the seller recognizes revenue over the period of time the customer accesses the IP.
Informal account format with space at the top for the account title and two sides for recording increases and decreases.
Is its original value for tax purposes reduced by any amounts included to date on tax returns.
Established when the enterprise has completed all planning, designing, coding, and testing activities that are necessary to establish that the product can be produced to meet its design specifications including functions, features, and technical performance requirements.
Represent changes in the retained earnings component of shareholders' equity for a corporation caused by revenue, expense, gain, and loss transactions.
Difference between pretax accounting income and taxable income and, consequently, between the reported amount of an asset or liability in the financial statements and iLo; tax basis which will "reverse" in later years.
Money can be invested today to earn interest and grow to a larger dollar amount in the future.
Allocates an asset's cost base according to the passage of time.
Information that is available to users early enough to allow its use in the decision process.
A way to gauge the ability of a company to satisfy its fixed debt obligations by comparing interest charges with the income available to pay those charges.
Percentage reduction from the list price.
Formally recognized by a written promissory note.
Exclusive right to display a word, a slogan, a symbol, or an emblem that distinctively identifies a company, a product, or a service.
Debt securities the investor (usually a financial institution) acquires principally for the purpose of selling in the near term.
Process of reviewing the source documents to determine the dual effect on the accounting equation and the specific elements involved.
The amount the seller expects to be entitled to receive from the customer in exchange for providing goods and services.
Economic events.
Freight-in; in a periodic system, freight costs generally are added to this temporary account, which is added to purchases in determining net purchases.
Shares of a company's own stock repurchased and not retired.
The original terms of a debt agreement are changed as a result of financial difficulties experienced by the debtor (borrower).
Person who accepts employer contributions, invests the contributions, accumulates the earnings on the investments, and pays benefits from the plan assets to retired employees or their beneficiaries.
A list of the general ledger accounts and their balances after recording all transactions during the period but before any adjusting entries.
Users must understand the information within the context of the decision being made.
Computes a depreciation rate per measure of activity and then multiplies this rate by actual activity to determine periodic depreciation.
Gains and losses that arise from holding an investment during a period in which its fair value changes.
Indirect reduction (contra account) in a deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Transaction price is uncertain because it includes an amount that varies depending on the occurrence or nonoccurrence of a future event.
Implies a consensus among different measurers.
Expression of each item in the financial statements as a percentage of an appropriate corresponding total, or base amount, but within the same year.
Benefits that employees have the right to receive even if their employment were to cease today.
For interest capitalization, weighted-average rate on all interest-bearing debt, including all construction loans, is used.
The seller retains the risk of uncollectibility.
The buyer assumes the risk of bad debts.
Products that are not yet complete in the manufacturing process.
Differences between current assets and current liabilities.
Used to organize the accounting information needed to prepare adjusting and closing entries and the financial statements.