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IMPORTANT ACCOUNTING / FINANCIAL

TERMINOLOGIES

Accounts payable. Amounts companies owe suppliers
for goods and services. Listed in the current liabilities
section on the statement of financial position.
Accounts receivable. Amounts customers owe a
company from sales of goods or services that the
company expects to collect within one year. Listed in the
current assets section on the statement of financial
position.
Annual report. A report a company publishes for its
stockholders at the end of each fiscal year. The report
includes required elements such as an auditors' report and
the company's statement of earnings, statement of
financial position, and statement of cash flows. The
report also includes elements such as letters and articles
by the company's executives, information on its financial
condition, and significant events.
Assets. Anything companies own. These things might be
physical assets such as buildings, trucks, inventories of
products, equipment, and cash. Or these things might be
intangible assets such as goodwill, trademarks, and

A summary of the findings of a firm of certified public accountants that audits. Bond. A form of debt security a government or corporation issues. or examines.patents. promising payment of the original investment plus interest on specified future dates . Balance sheet. Listed as a category on the statement of financial position Auditor. statement of financial position. Also called statement of financial position. Also called auditors' opinion and report of independent accountants. The auditor's main purpose is to make sure the statement of earnings. and statement of cash flows fairly present the company's financial condition. A firm of certified public accountants a company hires as an independent third party to review its financial information. Auditors' report. A financial statement that reports a company's assets and the claims against them — liabilities and stockholders' equity — at a set date noted on the statement. and that they comply with GAAP. a company's financial statements. This report is included in the company's annual report.

it is typically the cost of the asset minus accumulated depreciation. or a stockholders' equity account. Short-term. Credit. Cash. Listed in the current assets section on the statement of financial position. temporary securities that can be quickly and easily converted to cash. which results in either an increase in income. The value of an asset. and sometimes ultimately reach zero. Opposite of debit. For a fixed asset. assets. a liability. liabilities or net worth or a decrease in expenses. Financial statements of a company that presents the financial information of all its holdings as one company. the book values lessen.Book value. Listed in the current assets section on the statement of financial position. Consolidated statements. The amount invested in the business initially and time to time which is used to create wealth which is further used for producing / rendering goods & services. . Capital. As companies continue to use fixed assets to generate revenue. Currency and checks on hand and deposits in banks. An accounting entry. Cash equivalents.

Listed in the liabilities category on the statement of financial position. Debt. Current liabilities. and tax authorities. which results in either an increase in expenses. allocating its cost over its estimated useful life. not by collateral. Listed in the liabilities category on the statement of financial position. Unsecured debt backed only by the integrity of the borrower. Obligations a company has to others. Depreciation. Examples are accounts receivable and inventories of products to sell. One example is an unsecured bond. Opposite of credit. Money a company has borrowed and must repay.Current assets. An allowance for wear or age made to the value of a fixed asset. Debit. frequently with interest. An accounting entry. and documented by an agreement called an indenture. payable within one year. suppliers. Assets a company can convert to cash within one year. Listed in the assets category on the statement of financial position. Debenture. assets (capex) or a decrease in income. . liabilities or net worth. Listed in the assets category on the statement of financial position. such as creditors.

Listed in the operating expenses category on the statement of earnings. statement of earnings. if the profit is $1 million and 500. the amount that would remain if a company sold all of its assets and paid off all of its liabilities. advertising. Listed as dividends on the statement of stockholders' equity. Listed as stockholders' equity on the statement of financial position and on the statement of stockholders' equity. Equity. the earnings per share would be $2 ($1 million ÷ 500. For example. rent. Costs such as salaries. The portion of a company's profit assigned to each share of stock. Earnings report. statement of operations. The part of a company's assets that belongs to the stockholders.000 shares = $2). office supplies. and statement of profit and loss. Also called an income statement. Cash or stock payments from a company's profits distributed to stockholders.Dividends. In other words. A financial statement that reports the results of a company's business operations (revenue and expenses) for a set period.000 shares are outstanding. Expenses. Earnings per share (EPS). usually one year. Listed in the per share of common stock amounts category on the statement of earnings. and taxes. an equal amount for each share of stock owned. .

Fixed assets. An annual report section that provides information essential to fully understanding the financial statements. Notes explain the financial statements' numbers and any significant events affecting them.Financial Accounting Standards Board (FASB). Notes also provide additional detail and provide supplementary financial information. A set of rules and financial reporting guidelines companies must follow to prepare and present the financial information on the statements. services. Listed in the assets . Anything companies use for more than one year to manufacture. An intangible asset that adds value to the worth of a company. An association of accounting professionals that decides. or personnel. display. Goodwill. Listed after current assets in the assets category on the statement of financial position. maintains. store. Generally accepted accounting principles (GAAP). Also called notes form part of accounts. for example. and communicates generally accepted accounting principles (GAAP). and equipment" because that's what fixed assets usually are. the reputation of its products. Footnotes. and transport products. Often called "Property. plant.

The difference between a company's total sales and its cost of sales. Intangible assets. and foreign governments on a company's earnings. A financial statement that reports the results of a company's business operations (revenue and expenses) for a set period. Anything nonphysical. Fees placed by federal. Gross income. usually one year. Also called gross income. Listed in the assets category (sometimes as "Investments and sundry assets") on the statement of financial position. retailers. and patents. Income statement. such as goodwill.category (sometimes as "Investments and sundry assets") on the statement of financial position. Listed as a category on the statement of earnings. state. Listed on the statement of earnings. Also called an earnings report. trademarks. statement of earnings. that have value for a company. Gross profit. and distributors) or . Also called gross profit. statement of operations. local. Income taxes. Inventories. Listed as a category on the statement of earnings. and statement of profit and loss. All goods and materials available for sale (in the case of wholesalers. The difference between a company's total sales and its cost of sales.

The division of a company that answers stockholders' questions and sends them regular updates about the company's performance. Also. Listed in the liabilities category on the statement of financial position. A company's debts to a lender. Liquid asset. The amount two unrelated parties agree one of them will pay for something the other has. An asset that can be quickly converted into cash. Debt a company will repay after one year. instead of its equity. a landlord.raw materials and supplies. Listed in the category of assets (for example. work in process. Investor relations. a supplier of goods and services. Investments. Examples include cash and marketable securities. Leverage. to support its assets and grow. "Investments and sundry assets") on the statement of financial position. A company's equity ownership in unconsolidated subsidiaries and affiliates. and finished goods (in the case of manufacturers). Long-term debt. and others. Listed in the current assets section on the statement of financial position. A company's use of debt. Listed as a category on the statement of financial position. Market value. . a tax authority. Liabilities.

if a company has 4. showing what a company earned (or if lost. Net profit. Listed often literally as the "bottom line" on the statement of earnings. Also called net earnings and net profit. called net loss) for a set period. such as stocks and bonds. A company's total revenue less total expenses. Listed often literally as the "bottom line" on the statement of earnings. that companies can convert to cash.000. Also called net earnings and net income. called net loss) for a set period.000 shares of stock outstanding and the current price per share is $50.000. Listed as assets on the statement of financial position. usually one year. Net income. . Listed often literally as the "bottom line" on the statement of earnings. showing what a company earned (or lost.000 x $50 or $200 million. Also called net income and net profit. A company's total revenue less total expenses. A company's total revenue less total expenses. Net earnings. Marketable securities. For example. called net loss) for a set period. showing what a company earned (or lost. the company's market value is 4. usually one year. usually one year. Financial assets.the value of a company determined by multiplying the total number of outstanding shares by the market price per share.

Listed as total stockholders' equity on the statement of financial position. advertising. Operating expenses. A company's total sales less returned merchandise and discounts.Net sales. Listed as a category on the statement of earnings. Listed on the statement of earnings. including fixed assets and intangible assets. Listed in the assets category (after current assets) on the statement of financial position. Examples are salaries. Notes explain the financial statements' numbers and any significant events affecting them. Costs related to a company's operations. and entertainment. travel. An annual report section that provides information essential to fully understanding the financial statements. Also called footnotes. The amount of a company's stockholders' equity. Listed on the statement of earnings. sales commissions. . Operating income (or loss). Notes also provide additional detail and provide supplementary financial information. The result of deducting the cost of all sales and operating expenses from a company's net sales. Anything of long-term value to a company. Net worth. Non-current assets. Notes.

Retained earnings. Retained earnings is actually part of stockholders' equity and represents the portion of a company's assets that are financed from profitable operations rather than from selling stock to investors or borrowing from external sources. and to the industry average. Ratios provide a quick way to compare a company to its performance over time. Listed on the statement of financial position. For example. Ratio. if a company's stock is selling for $12 per share and the earnings per share is $2. minus any payments made to stockholders. a company's financial statements. or examines. A summary of the findings of a firm of independent certified public accountants that audits. A measure of the relative size of two numbers. This report is included in the company's annual report. Also called auditors' report and auditors' opinion. financial ratios are expressed as a times multiple (x) or a percentage (%). the P/E ratio is 6 (12 ÷ 2 = 6). Report of independent accountants. to other companies in the same industry. A ratio used to evaluate the relationship between a company's price per share and the earnings per share (EPS). .Price earnings ratio (P/E ratio). The total amount of a company's net earnings since its inception. Usually.

Also called the balance sheet. A financial statement that reports the results of a company's business operations (revenue and expenses) for a set period. Investments. . It reports the operating activities. Statement of cash flows. including stocks and bonds. Also called stock. investing activities and financing activities of the company.Revenue. and statement of profit and loss. Also called an earnings report. The total flow of funds into a company. A financial statement that reports the flow of cash in and out of a company for a set period. income statement. Share. usually one year. mostly for sales of its goods or services. Statement of financial position. A financial statement that reports a company's assets and the claims against them — liabilities and stockholders' equity — at a set date noted on the statement. usually one year. statement of operations. A certificate of ownership in a company. Listed as assets on the statement of financial position. Statement of earnings. Listed as the first category on the statement of earnings. Securities.

for example. usually one year. Also called statement of owners' equity. statement of earnings. . by detailing changes in net earnings or dividends paid to stockholders. A financial statement that reports the changes in the owners' interests (equity). statement of earnings. Also called statement of stockholders' equity. and statement of profit and loss. This statement is usually separate but a company may prepare a statement of retained earnings instead. A financial statement that reports the changes in the owners' interests (equity). and statement of operations. for example. Also called an earnings report. usually one year. A financial statement that reports the results of a company's business operations (revenue and expenses) for a set period. This statement is usually separate but a company may prepare a statement of retained earnings instead. income statement. A financial statement that reports the results of a company's business operations (revenue and expenses) for a set period. Also called an earnings report. by detailing changes in net earnings or dividends paid to stockholders. Statement of profit and loss. income statement. Statement of stockholders' equity. Statement of owners' equity.Statement of operations.

An owner of part of a company. if a company's sales have been increasing over many months or years.Stock. A pattern in a company's financial performance over time. analysts would describe this pattern as a sales growth trend. For example. Trend. Also called a shareholder. Stockholder. . A certificate of ownership in a company. Also called share.