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ACCOUNTING EQUATION
Balance sheet equation: assets = liabilities + net worth.
ACCOUNTING PERIOD
A period of time, (month, quarter, year), for which a financial statement is produced.
ACCOUNTS PAYABLE (A/P)
Trade accounts of businesses representing obligations to pay for goods and services received.
This represents what a business owes to its suppliers and other creditors at a given point in time.
ACCOUNTS RECEIVABLE (A/R)
Trade accounts of businesses representing monies due for goods sold or services rendered evidenced by notes, statements, invoices or other written evidence of a present obligation.
This represents the amount due to a business by its customers at a given point in time.
ACCRUAL BASIS ACCOUNTING
The most commonly used accounting method, which reports income when earned and expenses when incurred, as opposed to cash basis accounting, which reports income when received and expenses when paid.
ACCOUNTING
The recording, classifying, summarizing and interpreting in a significant manner and in terms of money, transactions and events of a financial character.
ACID-TEST RATIO
Same as quick ratio.
AMORTIZATION
The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest. Also, writing off an intangible asset investment over the projected life of the assets. See also negative amortization, graduated payment.
ASSUMPTIONS
The act of assuming/undertaking another's debts or obligations.
AUCTION
A public sale of goods or services to the highest bidder.
AUDIT
Verification of financial records and accounting procedures generally conducted by a CPA or accounting firm or if you're really unlucky, the IRS.
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