Quick Ratio
quick ratio - An extreme measure of liquidity, calculated by dividing quick assets (cash, short-term investments, and accounts receivable) by current liabili...
2 min read
accounting fundamentals
Accounting Fundamentals
Real Accounts
real accounts - Asset, liability, and equity accounts; balances are carried forward from the end of one period into the beginning of the next period
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accounting fundamentals
Remeasurement
remeasurement - Uses a variety of exchange rates to convert assets and liabilities of a foreign affiliate to the reporting currency; adjustment may impact op...
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financial reporting
accounting fundamentals
Replacement
replacement - A restoration of an asset, at least partially, to its original condition; such costs may be capitalized by reducing accumulated depreciation
2 min read
cost accounting
accounting fundamentals
Residual Income
residual income - An internal assessment technique that adjusts income for a presumed cost of capital (or other threshold rate of return); operating income -...
2 min read
financial reporting
cost accounting
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Residual Value
residual value - Amount expected be realized at the end of an asset's service life; "salvage value"
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accounting fundamentals
Return on Assets Ratio
return on assets ratio - A ratio comparing income (net income plus interest) to the average total assets
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financial reporting
accounting fundamentals
Return on Equity Ratio
return on equity ratio - A ratio comparing income (net income minus preferred dividends) to the average total equity
2 min read
financial reporting
accounting fundamentals
Return on Investment
return on investment - ROI: A model consisting of a margin component (Operating Income/Sales) and turnover component (Sales/Average Assets); reduces to Opera...
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financial reporting
accounting fundamentals
Secured Bond
secured bond - A bond that provides specific assets as collateral to help assure the payment stream
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accounting fundamentals
Service Life
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
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accounting fundamentals
Statement of Stockholders' Equity
statement of stockholders' equity - A financial statement that is often presented in lieu of a statement of retained earnings and other disclosures about equ...
2 min read
financial reporting
accounting fundamentals
Stock Dividend
stock dividend - A noncash corporate activity to provide shareholders with additional shares in proportion to existing ownership; makes for more shares outst...
2 min read
accounting fundamentals
Trading Securities
trading securities - Investments in debt acquired with the intent of generating profits by reselling the investment in the very near future; classified as cu...
2 min read
accounting fundamentals
Translation
translation - Uses prevailing exchange rates to convert assets and liabilities of a foreign affiliate to the reporting currency; adjustment may impact other ...
2 min read
financial reporting
accounting fundamentals
Unearned Revenue
unearned revenue - Revenue that has been collected in advance of providing goods and services to "earn it;" reported as a liability until earned
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accounting fundamentals
Warranty Liability
warranty liability - A liability that is recorded for the future costs of claims that are anticipated because of product warranty agreements
2 min read
cost accounting
accounting fundamentals
Working Capital
working capital - The difference between current assets and current liabilities
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accounting fundamentals
Modified Accelerated Cost Recovery System
Modified Accelerated Cost Recovery System - A "depreciation" approach common to the tax code; generally permits more rapid "recovery" of asset cost than GAAP...
2 min read
cost accounting
accounting fundamentals
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Modified Cash Basis
modified cash basis - Like the cash basis, except that certain large expenditures for durable assets may be recorded as assets initially
2 min read
accounting fundamentals
Natural Resources
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 ma...
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accounting fundamentals
Operating Leases
operating leases - A lease where the lessee makes periodic payments for periodic use of an asset, but does not assume the ultimate risks and rewards of ownin...
2 min read
accounting fundamentals
Other Assets
other assets - The category of a classified balance sheet for reporting assets that are not logically attached to one of the other specific sections
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financial reporting
accounting fundamentals
Owners' Equity
owners' equity - The residual of assets minus liabilities, representing the collective interest or position of the entity's owners
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accounting fundamentals
Property, Plant, and Equipment
property, plant, and equipment - Assets with long lives that will be used in an entity's production processes; land, buildings, and equipment
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cost accounting
accounting fundamentals
Debit
debit - The nature of an action to an account to indicate an increase (assets, expenses, and dividends) or decrease (liabilities, equity, and revenue); usual...
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accounting fundamentals
Depletion
depletion - The process used to allocate the cost of a natural resource asset to the accounting periods benefited
2 min read
cost accounting
accounting fundamentals
Equity Method
equity method - Method to account for stock investment when significant influence is present; changes in equity of the investee are recognized by the investo...
2 min read
accounting fundamentals
Exchange Transaction
exchange transaction - Trading one asset for another; to be booked at fair value if the transaction has commercial substance
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accounting fundamentals
Goodwill
goodwill - The excess of the purchase price of an acquired company over the fair value of the identifiable net assets acquired
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accounting fundamentals
Impairment
impairment - When the carrying amount of an asset is not recoverable from its future cash flow
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accounting fundamentals
Intangible Asset
intangible asset - Long-term asset that lacks physical existence; contract rights, copyrights, patents, trademarks, etc.
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accounting fundamentals
Investing Activities
investing activities - A cash flow category; including receipts from disposal of investments and long-term assets -- and payments to acquire long-term assets...
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accounting fundamentals
Lease/Lessee and Lessor
lease/lessee and lessor - Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset
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accounting fundamentals
Lessee
lessee - Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset
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accounting fundamentals
Lessor
lessor - Periodic payment from the user (lessee) of an asset to an owner (lessor) of the asset
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accounting fundamentals
Lump-sum Purchase
lump-sum purchase - A single price paid for a package of assets; the purchase price must be allocated to each of the components
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accounting fundamentals
Contingent Liabilities
contingent liabilities - Events that may or may not give rise to an actual liability because the outcome is uncertain; examples include lawsuits, environment...
2 min read
accounting fundamentals
Credit
credit - The nature of an action to an account to indicate an increase (liabilities, equity, and revenue) or decrease (assets, expenses, and dividends); usua...
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accounting fundamentals
Current Assets
current assets - Assets that will be converted into cash or consumed within one year or the operating cycle, whichever is longer
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accounting fundamentals
Current Ratio
current ratio - A measure of liquidity, calculated by dividing current assets by current liabilities
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accounting fundamentals
Capital Expenditures
capital expenditures - Ordinary and necessary costs incurred to place an item of property, plant, or equipment in its condition for intended use; such amount...
2 min read
cost accounting
accounting fundamentals
Change in Accounting Estimate
change in accounting estimate - A revision of assumptions used in a related accounting calculation (e.g., change in estimated useful life of an asset); handl...
2 min read
accounting fundamentals
Commitments
commitments - Promises to engage in some future action; not necessarily creating a recordable accounting liability but potentially necessitating enhanced dis...
2 min read
accounting fundamentals
Common Stock
common stock - The residual equity interest in a corporation; last in liquidation but usually receiving the full benefits of any corporate growth
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accounting fundamentals
Conservatism
conservatism - A general principle of accounting measurement; when in doubt, understate assets and income and overstate liabilities
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financial reporting
accounting fundamentals
Account
account - A record that is kept for each asset, liability, equity, revenue, expense, and dividend component of an entity
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accounting fundamentals
Accounting Equation
accounting equation - A financial relationship at the heart of the accounting model: Assets = Liabilities + Owners' Equity
2 min read
financial reporting
accounting fundamentals
All-inclusive Approach
all-inclusive approach - A concept of income by which virtually all nonequity-based transactions and events are captured and reported in the income statement...
2 min read
financial reporting
accounting fundamentals
Amortization
amortization - The process used to allocate the cost of an intangible asset to the accounting periods benefited
2 min read
cost accounting
accounting fundamentals
Balance Sheet
balance sheet - A financial statement that presents a firm's assets, liabilities, and owners' equity at a particular point in time
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financial reporting
accounting fundamentals
Betterment
betterment - Expenditures that improve or increase the service potential of an asset even beyond its original new condition; such costs may be capitalized by...
2 min read
cost accounting
accounting fundamentals
Book Value
book value - Cost minus accumulated depreciation; the net amount at which an asset is reported on the balance sheet
2 min read
financial reporting
cost accounting
+1
Book Value per Share
book value per share - Common stockholders' equity divided by common shares outstanding, to indicate stockholders' equity per share
2 min read
accounting fundamentals