Accounting Terms From Module 2

Front 1

Impaired assets

Back 1

where the asset's market value is deemed to have permanently declined below its reported value. When impairment occurs, company removes the impaired amt. from the asset value reported on balance sheet and moves to the income statement

Front 2

Asset Write-off or Asset Write-down

Back 2

the act of charging an asset amount to expense or loss to reduce the value of the asset and thus one's profits and earnings

Front 3

Marketable securities

Back 3

short-term investments, such as stock holdings, that can be quickly sold to raise cash

Front 4

Current assets

Back 4

assets expected to be converted into cash or used in operations within the next year

Front 5

Net working capital

Back 5

current assets - current liabilities. depends on operating cycle of company

Front 6

operating cycle

Back 6

time between paying cash for goods or employee services, and receiving cash from customers

Front 7

accrued liabilities

Back 7

refers to incomplete transactions.

Example: Warranty on products sold - when sale is recorded, companies must estimate the amt. of warranty liability likely to be incurred and record that warranty cost in the same period that the sale is recorded.
You may accrue a liability when:
* occurrence of obligation is probable
* amt of obligation is reasonably estimable

Front 8

deferred revenue

Back 8

payment up front for goods/services not yet rendered.

Front 9

contributed capital

Back 9

net funding that a company receives from issuing and acquiring its equity shares (stock)

Front 10

Income Statement

Back 10

reports revenues earned during that period, the expenses incurred to generate those revenues, and the resulting net income or loss

Front 11

Revenues

Back 11

increases to net assets (assets less liabilities) as a result of business activities

Front 12

Expenses

Back 12

the outflow or use of assets to generate revenues, including costs of products and services sold, operating costs like wages and advertising, and nonoperating costs like interest on debt

Front 13

Net income

Back 13

Revenues - Expenses, when the result is positive (net loss when negative)

Front 14

Operating Expenses

Back 14

usual and customary costs that a company incurs to support its main business activities, including cost of goods sold, selling expenses, depreciation expenses, amortization, and R&D

Front 15

Nonoperating Expenses

Back 15

relate to company's financing and investing activities, and inclue interest revenue and interest expense

Front 16

Transitory items

Back 16

One-time events (selling a building) that does not make up core income

Front 17

Revenue Recognition

Back 17

a principle prescribing that revenue is recognized when earned

Front 18

Gross profit

Back 18

sales minus cost of goods sold, indicates how much money you have left to cover overhead expenses (employee wages, sg&a, etc)

Front 19

Credit Terms

Back 19

2/10, net 30 means that the buyer can reduce its price by 2% if it pays within 10 days, and net 30 means that the buyer must ay its bill within 30 days

Front 20

Matching principle

Back 20

all expenses incurred in generating revenues be recognized in the same period as the related revenues