|
|
| A
B C
D E
F G
H-I J-K-L
M N O
P Q-R S
T U-V-W-X-Y- Z |
Accounts payable
|
Accounts payable are amounts owed
by a business for goods or services they have purchased.
|
Accounts payable turnover
|
The accounts payable (a/p) turnover
ratio is calculated as
total purchases in the year
average accounts payable
Average accounts payable can be
determined 2 different ways:
 |
Add together the a/p balances from the beginning
of the year and the end of the year, and divide by 2 |
|
Add together the a/p totals from the end of
each month, and divide by 12. This is a better way of
calculating the ratio. |
If this ratio decreases from
one year to the next, it means the company is
taking longer to pay off its suppliers. If
the ratio increases, the company is paying off its
suppliers more quickly. |
Accounts receivable
|
Accounts receivable are amounts owed
to a business by their customers.
|
Accounts receivable turnover
|
The accounts receivable (a/r) turnover ratio is calculated as
total credit sales in the
year
average accounts receivable
Average accounts receivable can be
determined 2 different ways:
|
Add together the a/r balances from the beginning
of the year and the end of the year, and divide by 2 |
|
Add together the a/r totals from the end of
each month, and divide by 12. This is a better way of
calculating the ratio. |
If this ratio decreases from
one year to the next, it means the company is
taking longer to collect from its customers.
If the ratio increases, the company is collecting
from its customers more quickly.
See also aged accounts receivable
and day's sales outstanding. |
Accrual
|
An accrual is done at
the end of an accounting period (usually monthly)
to record costs which have been incurred but not
paid for or previously recorded, and to record
revenue which has been earned but not received or
previously recorded.
|
Accrual method accounting
|
Using the accrual method (or accrual basis) for preparing accounting records,
revenues
and costs are recorded in the accounting period in
which they occur, even if the revenues have not
been received or the costs have not been
paid. Under the
cash method, the revenues and expenses are
recorded when the revenues are received and the
expenses are paid. Most non-farm taxpayers engaged in business are required to use the accrual
method for preparing their tax returns. Farmers may choose the
cash method, but corporations or partnerships engaged in farming must
report their income using the accrual method. There are some
exceptions to this. See the IRS publication Farmers
ATG - Chapter Two - Income, Cash/Accrual/Hybrid.
|
Accrued Interest
|
Interest which has
accumulated since the last interest payment date.
|
Accumulated
depreciation
|
The total of all depreciation
which has been written off over the years against depreciable assets
such as buildings, machinery and equipment.
|
Aged accounts receivable
|
An aged accounts receivable
report shows the amounts in accounts receivable
according to how long they have been outstanding,
such as current, over 30 days, over 60 days, and
over 90 days. This report is used at year
end to calculate the allowance for doubtful
accounts. When amounts are outstanding over
90 days there is much less likelihood that they
will be eventually collected.
See also accounts receivable
turnover and day's sales outstanding. |
Amortization
|
Amortization
is the gradual expensing of an asset over a number
of years, instead of expensing it in the year of
purchase. Amortization usually relates to intangible assets
such as goodwill. Depreciation
is the term used for amortization of property such as buildings,
machinery and equipment, furniture and other assets which are used in
a business and have an expected life of more than one year. Amortization is
also the term used when a loan is being repaid
over time. The amortization schedule is a
document which shows the payment dates, payment
amount, interest and principal portion of each
payment, and the balance of the loan after each
payment, until the balance reaches zero. |
Annual report
|
Public
corporations must make available to their
shareholders a yearly report which includes the financial
statements of the corporation.
|
Arbitrage
|
The
simultaneous purchase of a security on one stock
exchange and sale of the same security on another
stock exchange, often in a different
country. This is done to make a profit from
the difference in prices between the two stock
exchanges, due to different prices, and currency
fluctuations. The person doing the
simultaneous purchase and sale is called an
arbitrageur.
|
Arrears
|
Amounts
owed that were not paid when due.
|
Articles of
incorporation
|
Every
corporation has articles of incorporation, a
document prepared by the people creating the
corporation. This document sets out the
structure and purpose of the corporation, and
specifies rules that the corporation must follow
regarding issuing or transferring shares, electing
officers, conducting general meetings, voting of
members, borrowing funds, paying dividends,
and other corporate functions.
|
Ask/bid
|
The ask price on a
security is the price that a prospective seller is
willing to accept, and the bid price is the price
that a prospective buyer is willing to pay.
|
Assets
|
Assets are items owned by or owed
to a company or individual, such as cash and
investments, inventories, prepaid expenses, accounts
receivable, and intangible assets
(goodwill, intellectual
property, etc.). Assets are generally shown
at cost on a balance sheet.
Property, equipment and intangible assets are shown at
book value (cost less accumulated depreciation or
amortization). Land is a fixed asset which
is not depreciated. |
Average collection period
|
See day's sales outstanding. |
Averaging down
|
Averaging down is when
you purchase a security that you already own, for
less than the price you originally paid. This
lowers your average cost.
|
| Tax
tip: Pay down all non-tax-deductible debt with
over 8% interest, then see our Save
and Invest page. |
| [back to top]
Revised: February 20, 2009
|
