Yellow Book
Written by the GENERAL ACCOUNTABILITY OFFICE, the yellow book sets forth standards to be followed in auditing the FINANCIAL STATEMENTS of entities that receive federal financial assistance. "Yellow Book" is the name given to "Government Auditing Standards" issued by the Comptroller General of the United States which contains standards for audits of government organizations, programs, activities and functions, and of government assistance received by contractors, nonprofit organizations and other nongovernment organizations
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Kamis, 27 Maret 2008
W
Withholding:
The retaining by an employer of a portion of an employee?s wages for the purpose of paying for various taxes, insurance plans, pension plans, union dues and other deductions.
Working Capital:
Working capital is the difference between current assets and current liabilities. It measures the margin of protection for current creditors. Working Capital reflects the ability of a company to finance current operations.
The retaining by an employer of a portion of an employee?s wages for the purpose of paying for various taxes, insurance plans, pension plans, union dues and other deductions.
Working Capital:
Working capital is the difference between current assets and current liabilities. It measures the margin of protection for current creditors. Working Capital reflects the ability of a company to finance current operations.
V
Variable Cost:
Variable cost is an operating expense, or operating expenses as a class, that varies directly, sometimes proportionately, with sales or production, facility, utilization, or other measure of activity.
Variable cost is an operating expense, or operating expenses as a class, that varies directly, sometimes proportionately, with sales or production, facility, utilization, or other measure of activity.
T
Term Loan:
A bank loan with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule. An example is a car loan. Usually a long-term loan with a tenure running up to ten years. An amortization program is worked out in the loan agreement for the liquidation of the loan over its tenure.
Total Asset Turnover:
Total asset turnover measures management's efficiency in managing all of a company's assets-specifically the generation of revenues from the company's total investment assets. The total asset turnover ratio is extremely important in high asset companies such as manufacturing. The higher the ratio, the smaller the investment required to generate sales, the more profitable is the company.
Trade Payables:
Also known as Accounts Payable. Trade payables are open non-interest bearing accounts due to the trade usually due within 30, 60 or 90 days.
Trading Book
An accounting book that includes all securities that the institution regularly buys and sells on the stock market. These securities are accounted for in a different way than those in the banking book, which are meant to be held by the institution until they mature and are not usually affected by market activity.
Trial Balance:
A trial balance is a listing of the accounts in a company's general ledger and their balances as of a specific date. A trial balance is prepared at the end of an accounting period and is used to see if additional adjusting entries are required to any of the balances. The basic accounting system relies on double-entry accounting, therefore, the trial balance will have the same total debits and the same total credits. A trial balance is out of balance when the debits do not agree with the credits.
A bank loan with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule. An example is a car loan. Usually a long-term loan with a tenure running up to ten years. An amortization program is worked out in the loan agreement for the liquidation of the loan over its tenure.
Total Asset Turnover:
Total asset turnover measures management's efficiency in managing all of a company's assets-specifically the generation of revenues from the company's total investment assets. The total asset turnover ratio is extremely important in high asset companies such as manufacturing. The higher the ratio, the smaller the investment required to generate sales, the more profitable is the company.
Trade Payables:
Also known as Accounts Payable. Trade payables are open non-interest bearing accounts due to the trade usually due within 30, 60 or 90 days.
Trading Book
An accounting book that includes all securities that the institution regularly buys and sells on the stock market. These securities are accounted for in a different way than those in the banking book, which are meant to be held by the institution until they mature and are not usually affected by market activity.
Trial Balance:
A trial balance is a listing of the accounts in a company's general ledger and their balances as of a specific date. A trial balance is prepared at the end of an accounting period and is used to see if additional adjusting entries are required to any of the balances. The basic accounting system relies on double-entry accounting, therefore, the trial balance will have the same total debits and the same total credits. A trial balance is out of balance when the debits do not agree with the credits.
U
Unearned Revenue:
See Customer Deposits.
Unrelated expenses:
Expenses incurred for anything not used for business.
See Customer Deposits.
Unrelated expenses:
Expenses incurred for anything not used for business.
S
Sales/Receivables Ratio:
It is also called receivable turnover. This ratio method measures the number of times trade receivables turn during the fiscal year. The higher the ratio, the shorter the time between sale and cash collection.
Secured Loan:
A loan which is secured by marketable securities or other marketable valuables. Secured loans may be either time or demand loans.
Self-Liquidating Loan:
A short term commercial loan, usually supported by a lien on a given product or commodities, which is liquidated from the proceeds of the sale of the product or commodities. Example: Loans granted for the growing of crops.
Simple Journal Entry:
A simple journal entry is an entry that involves only one debit and one credit in the transaction. An example would be recording monthly depreciation expense. The debit is depreciation expense and the credit is accumulated depreciation. A compound journal entry contains multiple debits and credits.
Sole Proprietorship:
Sole proprietorship is synonymous with proprietorship. A sole proprietorship is an unincorporated business with only one owner.
Solvency:
Solvency is a company's long-term ability to meet all financial obligations. When a company cannot meet all its financial obligations, it becomes insolvent.
Specific identification:
An inventory method that identifies each item by cost and sale.
Statement Of Cash Flows:
See Cash Flow Statement.
Straight-line:
A method of depreciation whereby the cost of the asset is divided by its useful life.
It is also called receivable turnover. This ratio method measures the number of times trade receivables turn during the fiscal year. The higher the ratio, the shorter the time between sale and cash collection.
Secured Loan:
A loan which is secured by marketable securities or other marketable valuables. Secured loans may be either time or demand loans.
Self-Liquidating Loan:
A short term commercial loan, usually supported by a lien on a given product or commodities, which is liquidated from the proceeds of the sale of the product or commodities. Example: Loans granted for the growing of crops.
Simple Journal Entry:
A simple journal entry is an entry that involves only one debit and one credit in the transaction. An example would be recording monthly depreciation expense. The debit is depreciation expense and the credit is accumulated depreciation. A compound journal entry contains multiple debits and credits.
Sole Proprietorship:
Sole proprietorship is synonymous with proprietorship. A sole proprietorship is an unincorporated business with only one owner.
Solvency:
Solvency is a company's long-term ability to meet all financial obligations. When a company cannot meet all its financial obligations, it becomes insolvent.
Specific identification:
An inventory method that identifies each item by cost and sale.
Statement Of Cash Flows:
See Cash Flow Statement.
Straight-line:
A method of depreciation whereby the cost of the asset is divided by its useful life.
R
Ratio Analysis:
Ratio analysis involves conversion of financial numbers from a company's financial statement into various ratios. Ratio analysis allows comparison of one company to another. Ratios look at relationships inside a company. A company of one size can be directly compared to a second company or a collection of companies which may be larger or smaller or even in a different business.
Repairs:
Keeps the property in good operating condition. Example: Adding gravel to a driveway is considered a repair.
Reserve For Bad Debts:
See definition of Allowance for Bad Debts.
Return of Capital:
A distribution that is paid out of the shareholder?s investment in the stock of the company.
Retained Earnings (Earned Surplus):
Retained earnings are prior year profits of the corporation that have not been paid out to the stockholders as of the balance sheet date. The earnings have been retained for use of the corporation. Retained earnings is an account in the Capital Section of the corporation balance sheet. Retained earnings increases when there is a profit by the corporation. Retained earnings decreases when there is a loss by the corporation or when cash dividends are paid to the stockholders. Retained earnings also decreases when the corporation buys back common stock. This type of stock is called "treasury stock".
Return On Investment (ROI):
Return on investment, as used by financial management, is the ratio of profits (before or after taxes) to net worth or stockholders equity.
Revenue:
The total of all receipts of an enterprise as a going concern: receipts from sales of products, merchandise, and services, and earnings from interest, dividends, rents and wages.
Ratio analysis involves conversion of financial numbers from a company's financial statement into various ratios. Ratio analysis allows comparison of one company to another. Ratios look at relationships inside a company. A company of one size can be directly compared to a second company or a collection of companies which may be larger or smaller or even in a different business.
Repairs:
Keeps the property in good operating condition. Example: Adding gravel to a driveway is considered a repair.
Reserve For Bad Debts:
See definition of Allowance for Bad Debts.
Return of Capital:
A distribution that is paid out of the shareholder?s investment in the stock of the company.
Retained Earnings (Earned Surplus):
Retained earnings are prior year profits of the corporation that have not been paid out to the stockholders as of the balance sheet date. The earnings have been retained for use of the corporation. Retained earnings is an account in the Capital Section of the corporation balance sheet. Retained earnings increases when there is a profit by the corporation. Retained earnings decreases when there is a loss by the corporation or when cash dividends are paid to the stockholders. Retained earnings also decreases when the corporation buys back common stock. This type of stock is called "treasury stock".
Return On Investment (ROI):
Return on investment, as used by financial management, is the ratio of profits (before or after taxes) to net worth or stockholders equity.
Revenue:
The total of all receipts of an enterprise as a going concern: receipts from sales of products, merchandise, and services, and earnings from interest, dividends, rents and wages.
Q
Quick Assets:
Those assets which, in the ordinary course of business, will be converted into cash within a reasonably short period of time (as within one year).
Quick Ratio:
A quick ratio or acid test ratio is a more rigorous test than the current ratio of short-run solvency. The quick ratio considers cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets.
Those assets which, in the ordinary course of business, will be converted into cash within a reasonably short period of time (as within one year).
Quick Ratio:
A quick ratio or acid test ratio is a more rigorous test than the current ratio of short-run solvency. The quick ratio considers cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets.
P
Partnership:
A partnership is an unincorporated business structure that has more than one owner. A partnership is different from a sole proprietorship in that a sole proprietorship can only have one owner.
Post:
To post is to summarize all journal entries and transfer them to the general ledger accounts. Posting is done at the end of an accounting period (monthly).
Predatory Pricing
An anti-competitive measure employed by a dominant company to protect market share from new or existing competitors. Predatory pricing involves temporarily pricing a product low enough to end a competitive threat.
Prepaid Expenses:
Prepaid expenses are amounts that are paid in advance by a company to a vendor or creditor for goods and services. An example would be insurance premiums that are paid in advance of the coverage contained in the policy. Prepaid expenses is classified as a current asset on the balance sheet of the company.
Prepaid Income:
See Customer Deposits.
Price Earnings Ratio:
It is also known as the company's P/E for investment purposes. The price-earnings ratio is the price of a company's share of common stock in the public market divided by its earnings per share (EPS). You multiply this multiple by the net income of the publicly traded company and you will have a value for the business. If the business has no net income, there is no P/E. To illustrate a P/E ratio if the price of the stock is $35, and the EPS is $3.50, the P/E ratio is 10 times earnings.
Profit And Loss Statement:
It is also called a "P&L" and income statement. It shows a company's business revenue and expenses for a specific period of time. For example, for the six months ending June 30, 2002. The difference between total revenue or total sales and the total expenses is the company's net income. A key element of the profit and loss statement, one that distinguishes it from a balance sheet, is that the amounts shown on the statement represent transactions over a period of time, such as, six months ending June 30, 2002, while the items on the balance sheet show information for a specific date, such as, June 30, 2002.
Profit Plan:
The profit plan for the fiscal year is a complete financial picture of the operating plans, sales volumes, capital expenditure plans, and the resulting profitability, financial condition, and cash flow for the year. The profit and loss portion is developed by applying operating budgets to the forecast sales. These, plus the capital budgets, are analyzed to determine their effect on the financial position and to develop the cash flow.
Proprietorship:
A proprietorship is an unincorporated business structure with only one owner.
Purchases:
The inventory or raw materials for manufacturing, merchandising, or mining plus cost of shipping minus purchases for personal use.
A partnership is an unincorporated business structure that has more than one owner. A partnership is different from a sole proprietorship in that a sole proprietorship can only have one owner.
Post:
To post is to summarize all journal entries and transfer them to the general ledger accounts. Posting is done at the end of an accounting period (monthly).
Predatory Pricing
An anti-competitive measure employed by a dominant company to protect market share from new or existing competitors. Predatory pricing involves temporarily pricing a product low enough to end a competitive threat.
Prepaid Expenses:
Prepaid expenses are amounts that are paid in advance by a company to a vendor or creditor for goods and services. An example would be insurance premiums that are paid in advance of the coverage contained in the policy. Prepaid expenses is classified as a current asset on the balance sheet of the company.
Prepaid Income:
See Customer Deposits.
Price Earnings Ratio:
It is also known as the company's P/E for investment purposes. The price-earnings ratio is the price of a company's share of common stock in the public market divided by its earnings per share (EPS). You multiply this multiple by the net income of the publicly traded company and you will have a value for the business. If the business has no net income, there is no P/E. To illustrate a P/E ratio if the price of the stock is $35, and the EPS is $3.50, the P/E ratio is 10 times earnings.
Profit And Loss Statement:
It is also called a "P&L" and income statement. It shows a company's business revenue and expenses for a specific period of time. For example, for the six months ending June 30, 2002. The difference between total revenue or total sales and the total expenses is the company's net income. A key element of the profit and loss statement, one that distinguishes it from a balance sheet, is that the amounts shown on the statement represent transactions over a period of time, such as, six months ending June 30, 2002, while the items on the balance sheet show information for a specific date, such as, June 30, 2002.
Profit Plan:
The profit plan for the fiscal year is a complete financial picture of the operating plans, sales volumes, capital expenditure plans, and the resulting profitability, financial condition, and cash flow for the year. The profit and loss portion is developed by applying operating budgets to the forecast sales. These, plus the capital budgets, are analyzed to determine their effect on the financial position and to develop the cash flow.
Proprietorship:
A proprietorship is an unincorporated business structure with only one owner.
Purchases:
The inventory or raw materials for manufacturing, merchandising, or mining plus cost of shipping minus purchases for personal use.
O
Online Accounting:
In recent years a number of accounting software developers have created online applications for small business accounting. These software programs, accessed through the Internet, allow the user to enter all transactions using a constantly updated accounting program, and access data that resides on a server separate from the desktop computer.
Operating Budgets:
Operating budgets are those budget allowances that pertain to the expenses and the incomes which are included in the profit and loss statements of the company for the given fiscal period.
Operating Lease:
An operating lease is a short-term, cancelable lease. An operating lease is expensed and not capitalized on the books of the company. See Capital Lease.
Other Assets:
Other Assets is a category of assets on the Balance Sheet including intangible assets that will not be converted into cash over the next 12 months. Examples of Other Assets are goodwill, covenant not to compete, trademarks, catalogs, brands, copyrights, loan fees, escrow costs, formulas, franchises, and mailing lists.
In recent years a number of accounting software developers have created online applications for small business accounting. These software programs, accessed through the Internet, allow the user to enter all transactions using a constantly updated accounting program, and access data that resides on a server separate from the desktop computer.
Operating Budgets:
Operating budgets are those budget allowances that pertain to the expenses and the incomes which are included in the profit and loss statements of the company for the given fiscal period.
Operating Lease:
An operating lease is a short-term, cancelable lease. An operating lease is expensed and not capitalized on the books of the company. See Capital Lease.
Other Assets:
Other Assets is a category of assets on the Balance Sheet including intangible assets that will not be converted into cash over the next 12 months. Examples of Other Assets are goodwill, covenant not to compete, trademarks, catalogs, brands, copyrights, loan fees, escrow costs, formulas, franchises, and mailing lists.
N
Net earnings:
Earnings after deductions.
Net Income:
Net income is also called net profit or earnings. Net income is the difference between a company's gross profit and its total expenses. For example, if gross profit of a company is $400,000 while expenses are $300,000, the net income would be $100,000. The net income is found at the bottom of the income statement and often times referred to as "The Bottom Line" by business owners.
Net Loss:
The excess of the total expenses over the gross profit.
Net Sales:
The final amount of sales, determined by subtracting the amount of sales returns and allowances and sales discount from the total amount of sales, for a fiscal period.
Net Worth:
It is also called equity or capital. Net worth or equity is the difference between total liabilities and total assets. For example, if total assets of a sole proprietorship is $500,000 and total liabilities is $350,000, the total net worth would be $150,000. In a corporation, net worth or stockholders equity consists of capital stock, capital surplus, and retained earnings (earned surplus).
Noncapital asset:
Propertythat is not a capital asset.
Notes Payable:
Written interest-bearing promises to persons or businesses to pay certain amounts at certain times.
Notes Payable-Short Term:
Short-term (less than 12 months) interest bearing obligations, including bank and commercial paper.
Notes Receivable:
Written interest-bearing promises from persons or businesses agreeing to pay certain amounts at certain times.
Earnings after deductions.
Net Income:
Net income is also called net profit or earnings. Net income is the difference between a company's gross profit and its total expenses. For example, if gross profit of a company is $400,000 while expenses are $300,000, the net income would be $100,000. The net income is found at the bottom of the income statement and often times referred to as "The Bottom Line" by business owners.
Net Loss:
The excess of the total expenses over the gross profit.
Net Sales:
The final amount of sales, determined by subtracting the amount of sales returns and allowances and sales discount from the total amount of sales, for a fiscal period.
Net Worth:
It is also called equity or capital. Net worth or equity is the difference between total liabilities and total assets. For example, if total assets of a sole proprietorship is $500,000 and total liabilities is $350,000, the total net worth would be $150,000. In a corporation, net worth or stockholders equity consists of capital stock, capital surplus, and retained earnings (earned surplus).
Noncapital asset:
Propertythat is not a capital asset.
Notes Payable:
Written interest-bearing promises to persons or businesses to pay certain amounts at certain times.
Notes Payable-Short Term:
Short-term (less than 12 months) interest bearing obligations, including bank and commercial paper.
Notes Receivable:
Written interest-bearing promises from persons or businesses agreeing to pay certain amounts at certain times.
L
Last-In-First-Out (LIFO):
The letters LIFO represents "last-in-first-out". It is an inventory cost flow method whereby the last goods purchased are assumed to be the first goods sold by the company so that the ending inventory is priced as though the remaining items were the first goods purchased.
Liabilities:
Liabilities are what the company owes its creditors. Liabilities are balance sheet accounts. Examples of liabilities are accounts payable, payroll taxes payable, rent payable, long-term debt, and income taxes payable.
LIFO (Last in, first out):
A method of inventory valuation in which the last items entered into inventory are considered the first items out
Line Of Credit:
An agreement between a bank and a customer whereby the bank agrees to lend the customer funds up to a previously agreed maximum amount. A line of credit is widely used by large organizations for the future commitments and purchases of inventory.
Liquidity:
A Term used to describe the solvency of a business, and which has special reference to the degree of readiness in which assets can be converted into cash without loss.
Long-Term Debts:
See Long Term Liabilities
Long-Term Liabilities:
Long-term liabilities are liabilities of a company that are due in more than one year. An example of a long-term liability would be a bank debt maturing in five years.
The letters LIFO represents "last-in-first-out". It is an inventory cost flow method whereby the last goods purchased are assumed to be the first goods sold by the company so that the ending inventory is priced as though the remaining items were the first goods purchased.
Liabilities:
Liabilities are what the company owes its creditors. Liabilities are balance sheet accounts. Examples of liabilities are accounts payable, payroll taxes payable, rent payable, long-term debt, and income taxes payable.
LIFO (Last in, first out):
A method of inventory valuation in which the last items entered into inventory are considered the first items out
Line Of Credit:
An agreement between a bank and a customer whereby the bank agrees to lend the customer funds up to a previously agreed maximum amount. A line of credit is widely used by large organizations for the future commitments and purchases of inventory.
Liquidity:
A Term used to describe the solvency of a business, and which has special reference to the degree of readiness in which assets can be converted into cash without loss.
Long-Term Debts:
See Long Term Liabilities
Long-Term Liabilities:
Long-term liabilities are liabilities of a company that are due in more than one year. An example of a long-term liability would be a bank debt maturing in five years.
J
Journal:
A journal is the chronological, day-to-day transactions of a company. Revenue by sources are recorded in the sales journal and cash receipts journal. Expenses by sources are recorded in the accounts payable journal and cash disbursements journal. A general journal is used to record period ending adjusting journal entries. The Payroll Journal is dedicated to payroll entries. The general journal is used for occasional and year-end adjusting and correcting entries. The Standard Entries Journal is for adjusting entries that occur monthly, such as depreciation and matching FICA
A journal is the chronological, day-to-day transactions of a company. Revenue by sources are recorded in the sales journal and cash receipts journal. Expenses by sources are recorded in the accounts payable journal and cash disbursements journal. A general journal is used to record period ending adjusting journal entries. The Payroll Journal is dedicated to payroll entries. The general journal is used for occasional and year-end adjusting and correcting entries. The Standard Entries Journal is for adjusting entries that occur monthly, such as depreciation and matching FICA
I
Income Accounts:
Income accounts are the accounts that a company keeps track of its sources of income. Examples of income accounts are merchandise sales, legal and professional fees, consulting fees, and interest income. Income accounts are credit balance accounts that increase profits.
Income Statement:
It is also called a profit and loss statement or P&L. An income statement lists the company's income by revenue sources, cost of sales, expenses by various categories, and net income which is gross profit minus total expenses.
Income Taxes Payable:
The liability account indicating the amount of income taxes due for a "C" corporation for state and federal corporate taxes at a specific date. It can include both a current portion and a deferred portion. A deferred portion would be a timing difference between depreciation expense per books and depreciation for corporate income tax purposes.
Installment Sale:
An installment sale is selling property and receiving the sales price over a series of payments. A down payment is normally made and the balance of the sale is an installment sale. An example would be fifteen (15) years.
Insurance Premium:
The amount paid to an insurance company for a specific amount and kind of protection.
Intangible Assets:
Items of non-physical nature such as goodwill, patents, and trademarks that are of value to a company as a going concern, the value being dependent upon the rights and earning power that possession confers upon the owner.
Inventory:
Inventory is the cost of goods a company holds for sale to customers. The inventory can be merchandise a company buys for resale, or it can be merchandise that a company manufactures or processes, selling the completed product to the customer. Inventory can be valued using the following methods: Specific Identification, FIFO, or LIFO.
Inventory Turnover:
The number of times a business turns its merchandise inventory into sales each year.
Inventory Turnover Ratio:
Inventory turnover ratio measures the average efficiency of the company in managing and selling inventories during the reporting period. The number is calculated by dividing the Cost of Sales annualized by the average inventory value. For instance, if the company's Cost of Goods Sold for the 12 month period is $500,000, and their average inventory balance through the year was 50,000, then they are said to have a turnover rate of ten times. In most cases, a company is seeking a higher turnover rate, indicating a more efficient management of inventory.
Income accounts are the accounts that a company keeps track of its sources of income. Examples of income accounts are merchandise sales, legal and professional fees, consulting fees, and interest income. Income accounts are credit balance accounts that increase profits.
Income Statement:
It is also called a profit and loss statement or P&L. An income statement lists the company's income by revenue sources, cost of sales, expenses by various categories, and net income which is gross profit minus total expenses.
Income Taxes Payable:
The liability account indicating the amount of income taxes due for a "C" corporation for state and federal corporate taxes at a specific date. It can include both a current portion and a deferred portion. A deferred portion would be a timing difference between depreciation expense per books and depreciation for corporate income tax purposes.
Installment Sale:
An installment sale is selling property and receiving the sales price over a series of payments. A down payment is normally made and the balance of the sale is an installment sale. An example would be fifteen (15) years.
Insurance Premium:
The amount paid to an insurance company for a specific amount and kind of protection.
Intangible Assets:
Items of non-physical nature such as goodwill, patents, and trademarks that are of value to a company as a going concern, the value being dependent upon the rights and earning power that possession confers upon the owner.
Inventory:
Inventory is the cost of goods a company holds for sale to customers. The inventory can be merchandise a company buys for resale, or it can be merchandise that a company manufactures or processes, selling the completed product to the customer. Inventory can be valued using the following methods: Specific Identification, FIFO, or LIFO.
Inventory Turnover:
The number of times a business turns its merchandise inventory into sales each year.
Inventory Turnover Ratio:
Inventory turnover ratio measures the average efficiency of the company in managing and selling inventories during the reporting period. The number is calculated by dividing the Cost of Sales annualized by the average inventory value. For instance, if the company's Cost of Goods Sold for the 12 month period is $500,000, and their average inventory balance through the year was 50,000, then they are said to have a turnover rate of ten times. In most cases, a company is seeking a higher turnover rate, indicating a more efficient management of inventory.
H
Historical Cost:
Historical cost is a generally accepted accounting principle requiring all financial statement items be based upon original cost. Historical cost means what it cost the company for the item. It is not fair market value. This means that if your company purchased a building, it is recorded on the balance sheet at its historical cost. It is not recorded at fair market value which would be what your company could sell the building for in the open market.
Historical cost is a generally accepted accounting principle requiring all financial statement items be based upon original cost. Historical cost means what it cost the company for the item. It is not fair market value. This means that if your company purchased a building, it is recorded on the balance sheet at its historical cost. It is not recorded at fair market value which would be what your company could sell the building for in the open market.
G
General Ledger:
It is also known as G/L and The Final Book of Entry. It is collection of all balance sheet, income, and expense accounts used to keep the accounting records of a company. A General Ledger is a perpetual record of the activity and balances of the accounts. Each company has only one General Ledger.
Generally Accepted Accounting Principles:
It is also known as GAAP. Generally accepted accounting principles are rules that are used to record accounting transactions on an accrual basis of accounting. Cash basis of accounting is a comprehensive basis other than generally accepted accounting principles.
Goodwill:
Goodwill is an Other Asset. It is that portion of the purchase price paid for a business that is related to the intangible value of the company. The goodwill of a company may be due to a particularly favorable location; or its reputation in the community; or the quality of its employer and employees. It is calculated by subtracting the value of all net assets received upon purchase of the business from the purchase price. For example, if Company A paid one million dollars for a business that had current and fixed assets with a fair market value of $750,000, then the Goodwill is $250,000.
Gross earnings:
The total Earnings prior to deductions.
Gross Profit On Sales:
The amount by which the net sales exceed the cost of goods sold.
Gross Profit Or Margin:Gross profit or gross margin is net sales minus cost of sales or cost of goods sold. For example, if net sales were $400,000 and cost of sales were $300,000, gross profit would be $100,000. Gross margin of profit measures the ability of both to control costs and to pass along price increases through sales to customers. Gross margins vary with the type of business. For example a restaurant and bar would have a greater gross margin than a discount chain, like Wal-Mart, that depends upon volume to make money.
It is also known as G/L and The Final Book of Entry. It is collection of all balance sheet, income, and expense accounts used to keep the accounting records of a company. A General Ledger is a perpetual record of the activity and balances of the accounts. Each company has only one General Ledger.
Generally Accepted Accounting Principles:
It is also known as GAAP. Generally accepted accounting principles are rules that are used to record accounting transactions on an accrual basis of accounting. Cash basis of accounting is a comprehensive basis other than generally accepted accounting principles.
Goodwill:
Goodwill is an Other Asset. It is that portion of the purchase price paid for a business that is related to the intangible value of the company. The goodwill of a company may be due to a particularly favorable location; or its reputation in the community; or the quality of its employer and employees. It is calculated by subtracting the value of all net assets received upon purchase of the business from the purchase price. For example, if Company A paid one million dollars for a business that had current and fixed assets with a fair market value of $750,000, then the Goodwill is $250,000.
Gross earnings:
The total Earnings prior to deductions.
Gross Profit On Sales:
The amount by which the net sales exceed the cost of goods sold.
Gross Profit Or Margin:Gross profit or gross margin is net sales minus cost of sales or cost of goods sold. For example, if net sales were $400,000 and cost of sales were $300,000, gross profit would be $100,000. Gross margin of profit measures the ability of both to control costs and to pass along price increases through sales to customers. Gross margins vary with the type of business. For example a restaurant and bar would have a greater gross margin than a discount chain, like Wal-Mart, that depends upon volume to make money.
F
Fair Market Value:
It is also known as FMV. Fair market value is the price at which a willing seller will buy, in an arm's length transaction, when neither is under compulsion to sell or buy and both have reasonable knowledge of relevant facts. For example, a house may have cost you $150,000 but someone is willing to pay you $250,000 for the house today. The $150,000 is it's historical cost (see "historical cost" below) and the $250,000 is the fair market value. Another example would be an individual purchased 100 shares of IBM stock at $100 per share. The closing stock price is now $200. The FMV of the stock is $200 which is the amount that an individual is willing to pay for the stock. Note, however, that accounting transactions are recorded on a historical cost basis and not on a fair market value basis.
FIFO (First in, first out):
A method of inventory valuation in which the first items entered into inventory are considered the first items out.
Financial Accounting Standards Board (FASB):
FASB means the Financial Accounting Standards Board. It is a Board that writes the accounting standards that are used by practicing certified public accountants.
First in First Out (FIFO):
FIFO is an inventory cost flow method whereby the first goods purchased are assumed to be the first goods sold so that the ending inventory is valued as though it is the most recently purchased.
Fixed Assets:
These are also known as Property Plant and Equipment. Fixed assets are those assets of a permanent nature required for the normal conduct of a business. A fixed asset is a tangible item that has a future economic benefit. Fixed assets are higher valued items (such as more than $500) which will not be normally converted into cash during the ensuing fiscal period and have more than a twelve-month life. Fixed assets include furniture, fixtures, equipment, land, and buildings. Accounts receivable and inventory are not fixed assets.
Fixed Assets (Net):
Also called Book Value. Fixed assets net is all property, plant, leasehold improvements, and equipment, net of accumulated depreciation. For example, if the total fixed assets are $500,000 and accumulated depreciation is $100,000, fixed assets net would be $400,000.
Fixed Capital:
Capital invested in fixed assets, such as land, buildings, machinery, etc.
Fixed Cost:
Fixed cost is an operating expense that is incurred to provide facilities and organization which are kept in readiness to do business without regard to actual volumes of production and sales. Fixed costs remain relatively constant until changed by managerial decision; within general limits they do not vary with business volume. Examples are: interest on bonds, rent, property tax, depreciation (sometimes in part). These are operating expenses that are incurred to provide facilities and organizations that are kept in readiness to do business without regard to volumes of production and sales. These fixed costs remain relatively constant until changed by managerial decision. Some examples of fixed costs are rent, property taxes, and interest expense.
Foot:
Foot means to total the amounts in a column. This would be a column in a journal or a ledger.
Funds Statement:
An analysis of changes in working capital. Public corporations are required to provide this report.
It is also known as FMV. Fair market value is the price at which a willing seller will buy, in an arm's length transaction, when neither is under compulsion to sell or buy and both have reasonable knowledge of relevant facts. For example, a house may have cost you $150,000 but someone is willing to pay you $250,000 for the house today. The $150,000 is it's historical cost (see "historical cost" below) and the $250,000 is the fair market value. Another example would be an individual purchased 100 shares of IBM stock at $100 per share. The closing stock price is now $200. The FMV of the stock is $200 which is the amount that an individual is willing to pay for the stock. Note, however, that accounting transactions are recorded on a historical cost basis and not on a fair market value basis.
FIFO (First in, first out):
A method of inventory valuation in which the first items entered into inventory are considered the first items out.
Financial Accounting Standards Board (FASB):
FASB means the Financial Accounting Standards Board. It is a Board that writes the accounting standards that are used by practicing certified public accountants.
First in First Out (FIFO):
FIFO is an inventory cost flow method whereby the first goods purchased are assumed to be the first goods sold so that the ending inventory is valued as though it is the most recently purchased.
Fixed Assets:
These are also known as Property Plant and Equipment. Fixed assets are those assets of a permanent nature required for the normal conduct of a business. A fixed asset is a tangible item that has a future economic benefit. Fixed assets are higher valued items (such as more than $500) which will not be normally converted into cash during the ensuing fiscal period and have more than a twelve-month life. Fixed assets include furniture, fixtures, equipment, land, and buildings. Accounts receivable and inventory are not fixed assets.
Fixed Assets (Net):
Also called Book Value. Fixed assets net is all property, plant, leasehold improvements, and equipment, net of accumulated depreciation. For example, if the total fixed assets are $500,000 and accumulated depreciation is $100,000, fixed assets net would be $400,000.
Fixed Capital:
Capital invested in fixed assets, such as land, buildings, machinery, etc.
Fixed Cost:
Fixed cost is an operating expense that is incurred to provide facilities and organization which are kept in readiness to do business without regard to actual volumes of production and sales. Fixed costs remain relatively constant until changed by managerial decision; within general limits they do not vary with business volume. Examples are: interest on bonds, rent, property tax, depreciation (sometimes in part). These are operating expenses that are incurred to provide facilities and organizations that are kept in readiness to do business without regard to volumes of production and sales. These fixed costs remain relatively constant until changed by managerial decision. Some examples of fixed costs are rent, property taxes, and interest expense.
Foot:
Foot means to total the amounts in a column. This would be a column in a journal or a ledger.
Funds Statement:
An analysis of changes in working capital. Public corporations are required to provide this report.
E
Ending Inventory:
This is inventory figured at the end of the tax year and is used as the beginning inventory for the next year?s return.
Entrepreneur:
One who assumes the financial risk of the initiation, operation and management of a given business or undertaking.
Equity:
Equity is the net worth of a company, also known as Capital. ASSETS MINUS LIABILITIES=NET WORTH OR EQUITY. It is also known as capital for a sole proprietorship and for partnerships. Equity includes capital contributions by a sole proprietorship and capital contributions by a partnership. It also includes common stock issued by a corporation. Net income from a company increases equity while net losses reduces equity. Dividends paid by a corporation reduces equity. Treasury stock and stock dividends reduce equity of a corporation. Capital withdrawals reduce capital in a sole proprietorship and a partnership.
Expense Accounts:
Expense accounts are the accounts a company uses to keep track of costs of doing business. When recording an expense transaction, it is a debit because it reduces capital. Expenses are included in the income statement or profit and loss statement. Expense accounts reduce income. Examples of expense accounts are salary and wages, payroll taxes, advertising, depreciation, and repairs and maintenance.
This is inventory figured at the end of the tax year and is used as the beginning inventory for the next year?s return.
Entrepreneur:
One who assumes the financial risk of the initiation, operation and management of a given business or undertaking.
Equity:
Equity is the net worth of a company, also known as Capital. ASSETS MINUS LIABILITIES=NET WORTH OR EQUITY. It is also known as capital for a sole proprietorship and for partnerships. Equity includes capital contributions by a sole proprietorship and capital contributions by a partnership. It also includes common stock issued by a corporation. Net income from a company increases equity while net losses reduces equity. Dividends paid by a corporation reduces equity. Treasury stock and stock dividends reduce equity of a corporation. Capital withdrawals reduce capital in a sole proprietorship and a partnership.
Expense Accounts:
Expense accounts are the accounts a company uses to keep track of costs of doing business. When recording an expense transaction, it is a debit because it reduces capital. Expenses are included in the income statement or profit and loss statement. Expense accounts reduce income. Examples of expense accounts are salary and wages, payroll taxes, advertising, depreciation, and repairs and maintenance.
D
Days' Inventory:
It shows the average lengths of time items are in inventory.
Debenture:
It is a corporate IOU that is not backed by the company's assets and is much riskier than a bond.
Debits:
A debit is one component of every accounting transaction showing what the company received as a result of that transaction. Debits increase assets of a company and decrease liabilities and equity of a company. Furthermore, debits decrease sales, and increase cost and expenses on the Profit and Loss Report.
Debt To Equity:
Debt to equity measures the risk of the company's capital structure in terms of amounts of capital contributed by creditors and that contributed by owners. The debt to equity expresses the protection provided by owners for the creditors. A low debt to equity ratio implies ability to borrow.
Depreciation:
A method of recovering the cost of an asset over the assets useful life or recovery period.
Discounted Cash Flow:
Discounted cash flow is a method of computing the rate of return of a project. Under this method, the actual net cash flowback (after-tax earnings plus depreciation) is discounted annually until the present worth of the discounted cash flowback over the life of the project is equal to the cost of the project.
Double-Entry Accounting:
It is a system of recording transactions in a way that maintains the equality of the accounting equation which is assets=liabilities+owner's equity. The double-entry system records each transaction as both a debit and a credit.
Drawing Account:
A drawing account is the amount of cash drawn out by a sole proprietorship and by partners of a partnership,. The drawing amount reduces capital in a sole proprietorship and a partnership. It is nontaxable for income tax purposes
It shows the average lengths of time items are in inventory.
Debenture:
It is a corporate IOU that is not backed by the company's assets and is much riskier than a bond.
Debits:
A debit is one component of every accounting transaction showing what the company received as a result of that transaction. Debits increase assets of a company and decrease liabilities and equity of a company. Furthermore, debits decrease sales, and increase cost and expenses on the Profit and Loss Report.
Debt To Equity:
Debt to equity measures the risk of the company's capital structure in terms of amounts of capital contributed by creditors and that contributed by owners. The debt to equity expresses the protection provided by owners for the creditors. A low debt to equity ratio implies ability to borrow.
Depreciation:
A method of recovering the cost of an asset over the assets useful life or recovery period.
Discounted Cash Flow:
Discounted cash flow is a method of computing the rate of return of a project. Under this method, the actual net cash flowback (after-tax earnings plus depreciation) is discounted annually until the present worth of the discounted cash flowback over the life of the project is equal to the cost of the project.
Double-Entry Accounting:
It is a system of recording transactions in a way that maintains the equality of the accounting equation which is assets=liabilities+owner's equity. The double-entry system records each transaction as both a debit and a credit.
Drawing Account:
A drawing account is the amount of cash drawn out by a sole proprietorship and by partners of a partnership,. The drawing amount reduces capital in a sole proprietorship and a partnership. It is nontaxable for income tax purposes
Rabu, 26 Maret 2008
C
Capital:
Also known as Owner's Equity and Net Assets, it is the result of subtracting Liabilities from Assets. Businessmen will use the term "Capital" to describe the amount of money or other resources owned or used to acquire future income or benefits. The amount subscribed and paid by stockholders.
Capital Assets:
A collective term which included all fixed assets, consisting of Furniture and Fixtures, Land, Buildings, Machinery, etc.
Capital Budget:
This is the estimated amount planned to be expended for capital items in a given fiscal period. Capital items are fixed assets such as facilities and equipment, the cost of which is normally written off over a number of fiscal periods. The capital budget, however, is limited to the expenditures which will be made within the fiscal year comparable to the related operating budgets.
Capital Lease:
A capital lease is a considerable lease obligation that has to be capitalized on the balance sheet. A capital lease is characterized by the following (1) It is non-cancelable; (2) The life of the lease is less than the life of the asset being leased; (3) Bargain price of $1 at the end of the lease; (4) And the lessor does not pay for the upkeep, maintenance, or servicing costs of the asset during the lease period. The capital lease is recorded as a fixed asset on the balance sheet and is depreciated over the life of the asset.
Capital Stock:
The ownership shares of a corporation authorized by its articles of incorporation, including common and preferred stock.
Cash Basis:
The practice of recording income and expenses only when cash is actually received or paid out.
Cash Control:
A system of verifying the accuracy of all cash receipts and all cash disbursements.
Cash Flow:
This term may have different meanings depending upon who is using the term and in what context. Bankers usually define it as "Net Profits plus all non cash expenses", but it can also be defined as "the difference between cash receipts and disbursements over a specified period of time."
Cash Flows From Financing Activities:
Cash flows from financing activities are money used to or provided from financing activities. An example would be moneys received from borrowing from a bank. Another example would be moneys received from a stockholder loan. Another example would be capital contributions by partners in a partnership. Moneys used to reduce principal on a long-term debt would be an example of moneys used by financing activities.
Cash Flows From Investing Activities:
Cash flows from operating activities are moneys used or provided from investing activities. An example would be moneys used to purchase property and equipment. Another example would be money received from the sale of company stock.
Cash Flows From Operating Activities:
Cash flows from operating activities starts with a company's net income or loss for a specific period such as the year ending December 31, 2002. The net income or loss is adjusted for any non-cash items, such as, depreciation and amortization expense. Also included as cash flows from operating activities are other adjustments to reconcile net income or loss provided by operating activities. Those other adjustments are changes in current assets, other than cash, and changes in current liabilities for those accounts from the beginning of the year balances to the period end of the cash flow statement.
Cash Flow Statement:
A report describing the changes in the cash balances on the Balance Sheet. There are three categories for a cash flow statement: Cash Flows for Operating Activities, Cash Flows for Investing Activities, and Cash Flows from Financing Activities.
Chart Of Accounts:
It is a systematic listing of all accounts used by a company. Accounts are classified into six categories: Assets, Liabilities, Capital, Sales, Cost of Sales, and Expenses.
Closing:
The term closing refers to procedures that take place at the end of an accounting period, which is at the end of the year. Adjusting entries are made. The income and expense accounts are closed. The net income or loss that results from the closing of these accounts is transferred to an equity account called Owner's Equity for a sole proprietorship; Partner's Equity for a partnership; and Retained Earnings for a corporation.
Contribution Margin:
The difference between sales and variable costs; the amount remaining after variable costs are paid. For example: Sales $400,000 Variable Costs 150,000 Contribution Margin $250,000
Contribution Margin Percentage:
The contribution margin expressed as a percentage of sales, where sales equal 100% and the variable cost percentage is determined by dividing the variable cost total by sales. For example: Sales ($400,000) 100% Variable Cost Percentage ($150,000 ?00,000) 37.5% Contribution Margin Percentage 62.5%
Corporation:
It is a type of business organization that is chartered by a state and given many legal rights as a separate entity.
Cost:
Purchase price or expense paid to acquire something.
Cost Accounting:
It is a managerial accounting activity designed to help managers identify, measure, and control operating costs. It is used most often in a manufacturing environment.
Cost of goods sold:
A total that represents the cost of buying raw material and producing finished goods such as overhead, labor, and utilities.
Cost Of Goods Sold:
It is the cost of inventory items sold to a company's customers. It is determined using one of three methods: 1) Specific Identification, or 2) by adding beginning inventory and purchases for the period (which is called total available for sale) less ending inventory, or 3) Percentage of Sales. It is a reduction to Sales in arriving at Gross Profit. The amount determined by subtracting the value of the ending merchandise inventory from the sum of the beginning merchandise inventory and the net purchases for the fiscal period.
Cost of Labor:
The cost of labor used in the actual production of the goods.
Credit Memo:
It is the writing off of all or part of a customer's account balance. A credit memo would be required when a customer returns some merchandise that was bought. A credit memo would also occur when a customer overpaid on his or her account.
Credits:
A credit is one component or every accounting transaction indicating the source of the item received. Credits increase liabilities and equity and decrease assets on the balance sheet. Credits increase revenue and decrease cost and expenses on the income statement or profit and loss statement.
Current Assets:
Current assets are those assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during the normal operating cycle of the company (usually one year). Current assets include accounts receivable, cash, inventories, and prepaid expenses.
Current Liabilities:
Current liabilities are liabilities to be paid within one year of the balance sheet date. Examples of current liabilities are accounts payable, accrued wages payable, accrued rent payable, payroll taxes payable, and current portion of long-term debt.
Current Ratio:
It is a commonly used measure of short-run solvency. It is the immediate ability of a company to pay its current debts as they become due. It is calculated by dividing Current Assets by Current Liabilities. A perceived safe Current Ratio is 2 to 1, meaning Current Assets are twice Current Liabilities.
Customer Deposits:
It is also called Unearned Revenue and Prepaid Income. Customer Deposits represents money the company received in advance of providing a service or product to a customer. Customer Deposits is classified as a current liability on the balance sheet. It is classified as a liability because the company still owes the service or product to the customer. An example would be taking a deposit on a job before the job is started, or a Lay away Deposit.
Also known as Owner's Equity and Net Assets, it is the result of subtracting Liabilities from Assets. Businessmen will use the term "Capital" to describe the amount of money or other resources owned or used to acquire future income or benefits. The amount subscribed and paid by stockholders.
Capital Assets:
A collective term which included all fixed assets, consisting of Furniture and Fixtures, Land, Buildings, Machinery, etc.
Capital Budget:
This is the estimated amount planned to be expended for capital items in a given fiscal period. Capital items are fixed assets such as facilities and equipment, the cost of which is normally written off over a number of fiscal periods. The capital budget, however, is limited to the expenditures which will be made within the fiscal year comparable to the related operating budgets.
Capital Lease:
A capital lease is a considerable lease obligation that has to be capitalized on the balance sheet. A capital lease is characterized by the following (1) It is non-cancelable; (2) The life of the lease is less than the life of the asset being leased; (3) Bargain price of $1 at the end of the lease; (4) And the lessor does not pay for the upkeep, maintenance, or servicing costs of the asset during the lease period. The capital lease is recorded as a fixed asset on the balance sheet and is depreciated over the life of the asset.
Capital Stock:
The ownership shares of a corporation authorized by its articles of incorporation, including common and preferred stock.
Cash Basis:
The practice of recording income and expenses only when cash is actually received or paid out.
Cash Control:
A system of verifying the accuracy of all cash receipts and all cash disbursements.
Cash Flow:
This term may have different meanings depending upon who is using the term and in what context. Bankers usually define it as "Net Profits plus all non cash expenses", but it can also be defined as "the difference between cash receipts and disbursements over a specified period of time."
Cash Flows From Financing Activities:
Cash flows from financing activities are money used to or provided from financing activities. An example would be moneys received from borrowing from a bank. Another example would be moneys received from a stockholder loan. Another example would be capital contributions by partners in a partnership. Moneys used to reduce principal on a long-term debt would be an example of moneys used by financing activities.
Cash Flows From Investing Activities:
Cash flows from operating activities are moneys used or provided from investing activities. An example would be moneys used to purchase property and equipment. Another example would be money received from the sale of company stock.
Cash Flows From Operating Activities:
Cash flows from operating activities starts with a company's net income or loss for a specific period such as the year ending December 31, 2002. The net income or loss is adjusted for any non-cash items, such as, depreciation and amortization expense. Also included as cash flows from operating activities are other adjustments to reconcile net income or loss provided by operating activities. Those other adjustments are changes in current assets, other than cash, and changes in current liabilities for those accounts from the beginning of the year balances to the period end of the cash flow statement.
Cash Flow Statement:
A report describing the changes in the cash balances on the Balance Sheet. There are three categories for a cash flow statement: Cash Flows for Operating Activities, Cash Flows for Investing Activities, and Cash Flows from Financing Activities.
Chart Of Accounts:
It is a systematic listing of all accounts used by a company. Accounts are classified into six categories: Assets, Liabilities, Capital, Sales, Cost of Sales, and Expenses.
Closing:
The term closing refers to procedures that take place at the end of an accounting period, which is at the end of the year. Adjusting entries are made. The income and expense accounts are closed. The net income or loss that results from the closing of these accounts is transferred to an equity account called Owner's Equity for a sole proprietorship; Partner's Equity for a partnership; and Retained Earnings for a corporation.
Contribution Margin:
The difference between sales and variable costs; the amount remaining after variable costs are paid. For example: Sales $400,000 Variable Costs 150,000 Contribution Margin $250,000
Contribution Margin Percentage:
The contribution margin expressed as a percentage of sales, where sales equal 100% and the variable cost percentage is determined by dividing the variable cost total by sales. For example: Sales ($400,000) 100% Variable Cost Percentage ($150,000 ?00,000) 37.5% Contribution Margin Percentage 62.5%
Corporation:
It is a type of business organization that is chartered by a state and given many legal rights as a separate entity.
Cost:
Purchase price or expense paid to acquire something.
Cost Accounting:
It is a managerial accounting activity designed to help managers identify, measure, and control operating costs. It is used most often in a manufacturing environment.
Cost of goods sold:
A total that represents the cost of buying raw material and producing finished goods such as overhead, labor, and utilities.
Cost Of Goods Sold:
It is the cost of inventory items sold to a company's customers. It is determined using one of three methods: 1) Specific Identification, or 2) by adding beginning inventory and purchases for the period (which is called total available for sale) less ending inventory, or 3) Percentage of Sales. It is a reduction to Sales in arriving at Gross Profit. The amount determined by subtracting the value of the ending merchandise inventory from the sum of the beginning merchandise inventory and the net purchases for the fiscal period.
Cost of Labor:
The cost of labor used in the actual production of the goods.
Credit Memo:
It is the writing off of all or part of a customer's account balance. A credit memo would be required when a customer returns some merchandise that was bought. A credit memo would also occur when a customer overpaid on his or her account.
Credits:
A credit is one component or every accounting transaction indicating the source of the item received. Credits increase liabilities and equity and decrease assets on the balance sheet. Credits increase revenue and decrease cost and expenses on the income statement or profit and loss statement.
Current Assets:
Current assets are those assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during the normal operating cycle of the company (usually one year). Current assets include accounts receivable, cash, inventories, and prepaid expenses.
Current Liabilities:
Current liabilities are liabilities to be paid within one year of the balance sheet date. Examples of current liabilities are accounts payable, accrued wages payable, accrued rent payable, payroll taxes payable, and current portion of long-term debt.
Current Ratio:
It is a commonly used measure of short-run solvency. It is the immediate ability of a company to pay its current debts as they become due. It is calculated by dividing Current Assets by Current Liabilities. A perceived safe Current Ratio is 2 to 1, meaning Current Assets are twice Current Liabilities.
Customer Deposits:
It is also called Unearned Revenue and Prepaid Income. Customer Deposits represents money the company received in advance of providing a service or product to a customer. Customer Deposits is classified as a current liability on the balance sheet. It is classified as a liability because the company still owes the service or product to the customer. An example would be taking a deposit on a job before the job is started, or a Lay away Deposit.
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