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Glossary
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accelerated depreciation methods  Depreciation methods that recognize depreciation expense more rapidly in the early stages of an asset’s life than in the later stages of its life.
(See page(s) p. 413)
account  Record used for the classification and summary of transaction data.
(See page(s) p. 9)
account balance  Difference between total debits and total credits in an account.
(See page(s) p. 181)
account groups  Self-balancing entities that account for a governmental unit’s general fixed assets and the outstanding principal of its general long-term liabilities.
(See page(s) p. 535)
accounting  Service-based profession that provides reliable and relevant financial information useful in making decisions.
(See page(s) p. 3)
accounting controls  Procedures designed to safeguard assets and to ensure accuracy and reliability of the accounting records and reports.
(See page(s) p. 316)
accounting cycle  A cycle consisting of these stages: recording accounting data, adjusting the accounts, preparing the financial statements, and closing the nominal accounts; when one accounting cycle ends, a new one begins.
(See page(s) p. 61)
accounting equation  Expression of the relationship between the assets and the claims on those assets.
(See page(s) p. 10)
accounting event  Economic occurrence that causes changes in an enterprise’s assets, liabilities, or equity.
(See page(s) p. 11)
accounting period  Span of time covered by the financial statements, normally one year, but may be a quarter, a month or some other time span.
(See page(s) p. 17)
accounts receivable  Expected future cash receipts arising from permitting customers to buy now and pay later; usually are small with a short term to maturity.
(See page(s) 56, 359)
accounts receivable turnover ratio  Financial ratio that measures how fast accounts receivable are turned into cash; computed by dividing sales by accounts receivable.
(See page(s) p. 373)
accrual  Recognition of events before exchanging cash.
(See page(s) p. 56)
accrual accounting  Method of accounting that records the effects of accounting events in the period in which such events occur regardless of when cash is exchanged.
(See page(s) p. 55)
accumulated depreciation  Contra asset account that indicates the sum of all depreciation expense recognized for an asset since the date of acquisition.
(See page(s) 112, 412)
adjusting entry  Entry that updates account balances prior to preparing financial statements.
(See page(s) p. 64)
administrative controls  Procedures designed to evaluate performance and the degree of compliance with a firm’s policies and public laws.
(See page(s) p. 316)
adverse opinion  Audit opinion for a set of financial statements issued by a certified public accountant that means that part of or all of the financial statements are not in compliance with GAAP and the auditors believe this noncompliance would be material to the average prudent investor.
(See page(s) p. 72)
allocation  Recognition of expense by systematic assignment of the cost of an asset to periods of use.
(See page(s) p. 109)
allowance  Reduction in the selling price of goods extended to the buyer because the goods are defective or of lower quality than the buyer ordered to encourage a buyer to keep merchandise that would otherwise be returned.
(See page(s) p. 223)
Allowance for Doubtful Accounts  Contra asset account that contains an amount equal to the accounts receivable that are expected to be uncollectible.
(See page(s) p. 361)
allowance method of accounting for bad debts  Method of accounting for bad debts in which bad debts are estimated and expensed in the same period in which the corresponding sales are recognized. The receivables are reported in the financial statements at net realizable value (the amount expected to be collected in cash).
(See page(s) p. 360)
American Institute of Certified Public Accountants’ Code of  Set of ethical rules and guidelines above and beyond the requirements of laws and regulations that certified public accountants must follow.
(See page(s) p. 74)
amortization  Method of systematically allocating the costs of intangible assets to expense over their useful lives; also term for converting the discount on a note or a bond to interest expense over a designated period.
(See page(s) 378, 408)
amortization of loan  Systematic repayment of principal and interest over the life of a loan.
(See page(s) p. 459)
annual report  Document in which an organization provides information to stockholders, usually on an annual basis.
(See page(s) p. 23)
annuity  Series of equal payments made over a specified number of periods.
(See page(s) p. 480)
appropriated retained earnings  Retained earnings restricted by the board of directors for a specific purpose (e.g., to repay debt or for future expansion); although a part of total retained earnings, not available for distribution as dividends.
(See page(s) p. 528)
articles of incorporation  Items on an application filed with a state agency for the formation of a corporation; contains such information as the corporation’s name, its purpose, its location, its expected life, provisions for its capital stock, and a list of the members of its board of directors.
(See page(s) p. 514)
asset  Economic resource used by a business for the production of revenue.
(See page(s) p. 10)
asset exchange transaction  A transaction that decreases one asset while increasing another asset so that total assets do not change; for example, the purchase of land with cash.
(See page(s) p. 56)
asset source transaction  Transaction that increases an asset and a claim on assets; three types of asset source transactions are acquisitions from owners (equity), borrowings from creditors (liabilities), or earnings from operations (revenues).
(See page(s) pp. 12, 56)
asset use transaction  Transaction that decreases an asset and a claim on assets; the three types are distributions (transfers to owners), liability payments (to creditors), or expenses (used to operate the business).
(See page(s) p. 57)
audit  Detailed examination of a company’s financial statements and the documents that support the information presented in those statements.
(See page(s) p. 71)
authority manual  A document that outlines the chain of command for authority and responsibility. The authority manual provides guidelines for specific positions such as personnel officer as well a general authority such as all vice presidents are authorized to spend up to a designated limit.
(See page(s) p. 317)
authorized stock  Number of shares that the corporation is approved by the state to issue.
(See page(s) p. 520)
available-for-sale securities  Marketable securities that are not properly classified as held-to-maturity or trading securities.
(See page(s) p. 284)
average days in inventory ratio (sometimes called average  Financial ratio that measures the average number of days that inventory stays in stock before being sold.
(See page(s) p. 281)
average number of days to collect accounts receivable  Length of the average collection period for accounts receivable; computed by dividing 365 (or 366) by the accounts receivable turnover ratio.
(See page(s) p. 374)
bad debts expense  Expense associated with uncollectible accounts receivable; amount recognized may be estimated using the allowance method, or actual losses may be recorded using the direct write-off method.
(See page(s) p. 361)
balance sheet  Statement that lists the assets of a business and the corresponding claims (liabilities and equity) on those assets.
(See page(s) p. 18)
balloon payment  Large final payment due at the maturity of a debt that otherwise requires systematic smaller payments over the term of the loan prior to maturity.
(See page(s) p. 460)
bank reconciliation  Schedule that identifies and explains differences between the cash balance reported by the bank and the cash balance in the firm’s accounting records.
(See page(s) p. 322)
bank statement  Statement issued by a bank (usually monthly) that denotes all activity in the bank account for that period.
(See page(s) p. 321)
bank statement credit memo  Memo that describes an increase in the account balance.
(See page(s) p. 321)
bank statement debit memo  Memo that describes a decrease in the account balance.
(See page(s) p. 321)
basket purchase  Acquisition of several assets in a single transaction with no specific cost attributed to each asset.
(See page(s) p. 409)
board of directors  Group of individuals elected by the stockholders of a corporation to oversee its operations.
(See page(s) p. 517)
bond  Debt security used to obtain long-term financing in which a company borrows funds from a number of lenders, called bondholders; usually issued in denominations of $1,000.
bond discount  Difference between the selling price and the face amount of a bond sold for less than the face amount.
(See page(s) p. 468)
bond premium  Difference between the selling price and the face amount of a bond that is sold for more than the face amount.
(See page(s) p. 473)
book value  Historical (original) cost of an asset minus the accumulated depreciation; alternatively, undepreciated amount to date.
(See page(s) pp. 112, 414)
book value per share  Value of stock determined by dividing the total stockholders’ equity by the number of shares of stock.
(See page(s) p. 520)
books of original entry  Journals in which a transaction is first recorded.
(See page(s) p. 169)
call premium  Difference between the call price (the price that must be paid for a called bond) and the face amount of the bond.
(See page(s) p. 465)
call price  Specified price that must be paid for bonds that are called; usually higher than the face amount of the bonds.
(See page(s) p. 465)
callable bonds  Bonds that include a feature allowing the issuer to pay them off prior to maturity.
(See page(s) p. 465)
capital expenditures  (on an existing asset) Substantial amounts of funds spent to improve an asset’s quality or to extend its life.
(See page(s) p. 420)
capitalized  Recorded cost in an asset account until the item is used to produce revenue.
(See page(s) p. 127)
carrying value  Face amount of a bond liability less any unamortized bond discount or plus any unamortized bond premium.
(See page(s) p. 470)
cash  Coins, currency, checks, balances in checking and certain savings accounts, money orders, bank drafts, certificates of deposit, and other items that are payable on demand.
(See page(s) p. 319)
cash discount  Discount offered on merchandise sold to encourage prompt payment; offered by sellers of merchandise and represent sales discounts to the seller when they are used and purchase discounts to the purchaser of the merchandise.
(See page(s) p. 223)
cash inflows  Sources of cash.
(See page(s) p. 561)
cash outflows  Uses of cash.
(See page(s) p. 561)
Cash Short and Over  Account used to record the amount of cash shortages or overages; shortages are considered expenses and overages are considered revenues.
(See page(s) p. 327)
certified check  Check guaranteed by a bank to be drawn on an account having funds sufficient to pay the check.
(See page(s) p. 324)
certified public accountant (CPA)  Accountant who has met certain educational and experiential requirements and is licensed by the state government to provide audit services to the public.
(See page(s) p. 71)
chart of accounts  List of all ledger accounts and their corresponding account numbers.
(See page(s) p. 169)
checks  Prenumbered forms, sometimes multicopy, with the name of the business issuing them preprinted on the face, indicating to whom they are paid, the amount of the payment, and the transaction date.
(See page(s) p. 321)
claims  Owners’ and creditors’ interests in a business’s assets.
(See page(s) p. 10)
claims exchange transaction  Transaction that decreases one claim and increases another so that total claims do not change. For example, the accrual of interest expense is a claims exchange transaction; liabilities increase, and the recognition of the expense causes retained earnings to decrease.
(See page(s) p. 57)
classified balance sheet  Balance sheet that distinguishes between current and noncurrent items.
(See page(s) p. 330)
closely held corporation  Corporation whose stock is exchanged between a limited number of individuals.
(See page(s) p. 515)
closing entries  Entries used to transfer the balances in the Revenue, Expense, and Dividends accounts to the Retained Earnings account at the end of the accounting period.
(See page(s) pp. 172)
closing the books or closing  Process of transferring balances from nominal accounts (Revenue, Expense, and Dividends) to the permanent account (Retained Earnings).
(See page(s) p. 61)
code of professional conduct  A set of guidelines established by the American Institute of Certified Public Accountants (AICPA) to promote high ethical conduct among its membership.
(See page(s) p. 74)
collateral for loans  Assets pledged as security for a loan.
(See page(s) p. 461)
common size financial statements  Financial statements in which amounts are converted to percentages to allow a better comparison of period-to-period and company-to-company financial data since all information is placed on a common basis.
(See page(s) p. 232)
common stock  Basic class of corporate stock that carries no preferences as to claims on assets or dividends; certificates that evidence ownership in a company.
(See page(s) pp. 10, 521)
compound interest  Practice of reinvesting interest so that interest is earned on interest as well as on the initial principal.
(See page(s) p. 478)
compounding  Earning interest on interest.
(See page(s) p. 478)
comprehensive annual financial report (CAFR)  An annual report that provides information regarding all funds and account groups under the jurisdiction of a government reporting entity.
(See page(s) p. 535)
comprehensive income  Net income plus or minus unrealized gains or losses.
consolidated financial statements  Financial statements that represent the combined operations of a parent company and its subsidiaries.
(See page(s) p. 288)
continuity  Concept that describes the fact that a corporation’s life may extend well beyond the time at which any particular shareholder decides to retire or to sell his or her stock.
(See page(s) p. 517)
contra account  Account that normally has a balance opposite to that of the other accounts in a particular category (e.g., Accumulated Depreciation is classified as an asset, but it normally has a credit balance).
(See page(s) p. 165)
contra asset account  Account subtracted from another account with which it is associated; has the effect of reducing the asset account with which it is associated.
(See page(s) pp. 112, 412)
contra liability account  Account reported in the liability section of the balance sheet that has a debit balance; reduces total liabilities. A discount on a Note Payable is an example of a contra liability account.
(See page(s) p. 377)
contributed capital  Balance sheet term used to designate the portion of assets contributed to a business by its owners.
convertible bonds  Bonds that can be converted (exchanged) to an ownership interest (stock) in the corporation.
(See page(s) p. 465)
copyright  Legal protection of writings, musical compositions, and other intellectual property for the exclusive use of the creator or persons assigned the right by the creator.
(See page(s) p. 423)
corporation  Legal entity separate from its owners; formed when a group of individuals with a common purpose join together in an organization according to state laws.
(See page(s) p. 514)
cost method of accounting for treasury stock  Method of accounting for treasury stock in which the purchase of treasury stock is recorded at its cost to the firm but does not consider the original issue price or par value.
(See page(s) p. 525)
cost of goods available for sale  Total costs paid to obtain goods and to make them ready for sale, including the cost of beginning inventory plus purchases and transportation-in costs, less purchase returns and allowances and purchase discounts.
(See page(s) p. 218)
cost of goods sold  Total cost incurred for the goods sold during a specific accounting period.
(See page(s) p. 218)
credit  Entry that increases liability and equity accounts or decreases asset accounts.
(See page(s) p. 156)
creditor  Individual or institution that has loaned goods or services to a business.
(See page(s) p. 5)
cumulative dividends  Preferred dividends that accumulate from year to year until paid.
(See page(s) p. 521)
current (short-term) asset  Asset that will be converted to cash or consumed within one year or an operating cycle, whichever is longer.
(See page(s) pp. 330, 407)
current (short-term) liability  Obligation due within one year or an operating cycle, whichever is longer.
(See page(s) p. 330)
current ratio  Financial ratio that measures the relationship between current assets and current liabilities; determined by dividing current assets by current liabilities, with the result expressed in decimal format.
(See page(s) p. 331)
date of record  Date that establishes who will receive the dividend payment: shareholders who actually own the stock on the record date will be paid the dividend even if the stock is sold before the dividend is paid.
(See page(s) p. 526)
debenture  Unsecured bond issued based on the general credit of the organization.
(See page(s) p. 464)
debit  Entry that increases asset accounts or decreases liability and equity accounts.
(See page(s) p. 156)
debt security  Type of security acquired by loaning assets to the investee company.
(See page(s) p. 283)
debt to assets ratio  Financial ratio that measures a company’s level of risk.
(See page(s) p. 124)
declaration date  Date on which the board of directors actually declares a dividend.
(See page(s) p. 526)
deferral  Recognition of revenue or expense in a period after the cash is exchanged.
(See page(s) p. 109)
deferral transactions  Accounting transactions in which cash payments or receipts occur before the associated expense or revenue is recognized.
(See page(s) p. 566)
deferred tax liability  Taxes not paid until future years because of the difference in accounting methods selected for financial statements and methods required for tax purposes (e.g., a company may select straight-line depreciation for financial statement reporting but will be required to use MACRS for tax reporting).
(See page(s) p. 419)
demand  Consumer preferences expressed by offering money for goods or services.
depletion  Method of systematically allocating the costs of natural resources to expense as the resources are removed from the land.
(See page(s) p. 408)
deposit ticket  Bank form that accompanies checks and cash deposited into a bank account; normally specifies the account number, name of the account, and a record of the checks and cash being deposited.
(See page(s) p. 321)
deposits in transit  Deposits recorded in a depositor’s books but not received and recorded by the bank.
(See page(s) p. 323)
depreciable cost  
(See page(s) p. 414)
depreciation  Method of systematically allocating the costs of long-term tangible assets to expense over their useful lives.
(See page(s) p. 408)
depreciation expense  Portion of the original cost of a long-term tangible asset allocated to an expense account in a given period.
(See page(s) p. 112)
direct method  Method of preparing the statement of cash flows that reports the total cash receipts and cash payments from each of the major categories of activities (collections from customers, payment to suppliers).
(See page(s) p. 575)
direct write-off method  Method of recognizing bad debts expense only when accounts are determined to be uncollectible.
(See page(s) p. 368)
disclaimer of audit opinion  Position that an auditor can take with respect to financial statements when there is not enough information to confirm compliance or noncompliance with GAAP; is neither positive nor negative.
(See page(s) p. 73)
discount  Amount of interest included in the face of a note; the discount (interest) is subtracted from the face amount of the note to determine the principal amount of cash borrowed.
(See page(s) p. 377)
discount notes  Notes that have the interest included in their face value.
(See page(s) p. 376)
Discount on Bonds Payable  Contra liability account used to record the amount of discount on a bond issue.
(See page(s) p. 470)
Discount on Notes Payable  Contra liability account subtracted from the Notes Payable account to determine the carrying value of the liability.
(See page(s) p. 377)
dividend  Transfer of wealth from a business to its owners.
(See page(s) pp. 13, 285)
dividends in arrears  Cumulative dividends on preferred stock that have not been paid; must be paid prior to paying dividends to common stockholders.
(See page(s) p. 521)
double taxation  Policy to tax corporate profits distributed to owners twice, once when the income is reported on the corporation’s income tax return and again when the dividends are reported on the individual’s return.
(See page(s) p. 516)
double-declining-balance depreciation  Depreciation method that recognizes larger amounts of depreciation in the early stages of an asset’s life and progressively smaller amounts as the asset ages.
(See page(s) p. 410)
double-entry accounting (bookkeeping)  Method of keeping records that provides a system of checks and balances by recording transactions in a dual format.
(See page(s) pp. 12, 156)
earnings  The difference between revenues and expenses. Same as net income or profit
(See page(s) p. 4)
effective interest rate  Yield rate of bonds, which is usually equal to the market rate of interest on the day the bonds are sold.
(See page(s) p. 469)
effective interest rate method  Method of amortizing bond discounts and premiums that computes interest based on the carrying value of liability. As the liability increases or decreases, the amount of interest expense also increases or decreases.
(See page(s) p. 482)
elements  Primary components of financial statements including assets, liabilities, equity, contributions, revenue, expenses, distributions, and net income.
(See page(s) p. 5)
entity  Specific unit (individual, business, or institution) for which the accountant records and reports economic information; has boundaries that are distinct and separate from those of the owners, creditors, managers, and employees.
(See page(s) p. 23)
entrenched management  Management that may have become ineffective but because of political implications may be difficult to remove.
(See page(s) p. 517)
equity  Portion of assets remaining after the creditors’ claims have been satisfied (i.e., Assets _ Liabilities _ Equity); also called residual interest or net assets.
(See page(s) p. 10)
equity method  Method of accounting for investments in marketable equity securities; is required when the investor owns more than 20 percent of the investee company. The amount of investments carried under the equity method represents a measure of the book value of the investee rather than the cost or market value of the investment security.
(See page(s) p. 288)
equity security  An equity security is certificate that evidences an ownership interest in a company. An example is a common stock certificate.
(See page(s) p. 283)
estimated useful life  Time for which an asset is expected to be used by a business.
(See page(s) p. 410)
ex-dividend  Stock traded after the date of record but before the payment date; does not receive the benefit of the upcoming dividend.
(See page(s) p. 526)
expense  An economic sacrifice (decrease in assets or increase in liabilities) that is incurred in the process of generating revenue.
(See page(s) pp. 13, 59, 76)
expense transactions  Transactions completed in the process of operating a business that decrease assets or increase liabilities.
(See page(s) p. 564)
face value  Amount of the bond to be paid back (to the bondholders) at maturity.
(See page(s) p. 464)
fair value  The price at which securities or other assets sell in free markets. Also called market value.
(See page(s) p. 284)
fidelity bond  Insurance policy that a company buys to insure itself against loss due to employee dishonesty.
(See page(s) p. 316)
financial accounting  Accounting information designed to satisfy the needs of an organization’s external users, including business owners, creditors, and government agencies.
(See page(s) p. 6)
Financial Accounting Standards Board (FASB)  Privately funded organization with the primary authority for the establishment of accounting standards in the United States.
(See page(s) p. 9)
financial audit  Detailed examination of a company’s financial statements and the documents that support the information presented in those statements; includes a verification process that tests the reliability of the underlying accounting system used to produce the financial reports.
(See page(s) p. 71)
financial leverage  Concept of increasing earnings through debt financing; investment of money at a higher rate than that paid to borrow the money.
(See page(s) pp. 126, 475)
financial resources  Money or credit arrangements supplied to a business by investors (owners) and creditors.
(See page(s) p. 5)
financial statements  Primary means of communicating the financial information of an organization to the external users. The four general-purpose financial statements are the income statement, statement of changes in equity, balance sheet, and statement of cash flows.
(See page(s) p. 8)
financing activities  Cash transactions associated with owners and creditors; also one of the three categories of cash inflows and outflows shown on the statement of cash flows. This category of cash activities shows the amount of cash provided by these resource providers and the amount of cash that is returned to them.
(See page(s) pp. 18, 562)
first-in, first-out (FIFO) cost flow method  Inventory cost flow method that treats the first items purchased as the first items sold for the purpose of computing cost of goods sold.
(See page(s) p. 268)
fiscal year  Year for which a company’s accounting records are kept.
(See page(s) p. 155)
fixed interest rate  Interest rate (charge for the use of money) that does not change over the life of the loan.
(See page(s) p. 459)
FOB (free on board) destination  Term that designates the seller as the responsible party for freight costs (transportationin costs).
(See page(s) p. 224)
FOB (free on board) shipping point  Term that designates the buyer as the responsible party for freight costs (transportationin costs).
(See page(s) p. 224)
footnotes to the financial statements  Explanations of the information in the financial statements such as estimates used and options allowable under GAAP that have been chosen.
(See page(s) p. 174)
franchise  Exclusive right to sell products or perform services in certain geographic areas.
(See page(s) p. 423)
fund  Independent accounting entity with a self-balancing set of accounts segregated for the purposes of carrying on specific activities.
(See page(s) p. 535)
fund accounting  Type of accounting used by governmental entities.
(See page(s) p. 535)
future value  Amount an investment will be worth at some point in the future, assuming a specified interest rate and the reinvestment of interest each period that it is earned.
(See page(s) p. 479)
gains  Increases in assets or decreases in liabilities that result from peripheral or incidental transactions.
(See page(s) p. 121)
general authority  Policies and procedures that apply across different levels of a company’s management, such as everyone flies coach class.
(See page(s) p. 317)
general journal  Journal in which all types of accounting transactions can be entered but which is commonly used to record adjusting and closing entries and unusual types of transactions.
(See page(s) p. 169)
general ledger  Complete set of accounts used in accounting systems.
(See page(s) p. 14)
generally accepted accounting principles (GAAP)  Rules and regulations that accountants agree to follow when preparing financial reports for public distribution.
(See page(s) p. 8)
going concern assumption  Assumption that a company will continue to operate indefinitely, will pay its obligations and should therefore report those obligations at their full face value in the financial statements.
(See page(s) p. 360)
goodwill  Added value of a successful business that is attributable to factors—reputation, location, and superior products—that enable the business to earn above-average profits; stated differently, the excess paid for an existing business over the appraised value of the net assets.
(See page(s) p. 424)
gross margin (gross profit)  Difference between sales revenue and cost of goods sold; the amount a company makes from selling goods before subtracting operating expenses.
(See page(s) p. 218)
gross margin method  Method of estimating ending inventory that assumes that the percentage of gross margin to sales remains relatively stable from one accounting period to the next.
(See page(s) p. 279)
gross margin percentage  Expression of gross margin as a percentage of sales computed by dividing gross margin by net sales; the amount of each dollar of sales that is profit before deducting any operating expenses.
(See page(s) p. 232)
half-year convention  Tax rule that requires six months of depreciation expense to be taken in the year of purchase of the asset and the year of disposal regardless of the purchase date.
(See page(s) p. 418)
held-to-maturity securities  Debt securities intended to be held until maturity.
(See page(s) p. 284)
historical cost concept  Actual price paid for an asset when it was purchased.
(See page(s) pp. 14, 73, 409)
horizontal statements model  Arrangement of a set of financial statements horizontally across a sheet of paper.
(See page(s) p. 19)
imprest basis  Description of the periodic replenishment of a fund to maintain it at its specified original amount.
(See page(s) p. 327)
income  Added value created in transforming resources into more desirable states.
(See page(s) p. 4)
income statement  Statement that measures the difference between the asset increases and the asset decreases associated with running a business. This definition is expanded in subsequent chapters as additional relationships among the elements of the financial statements are introduced.
(See page(s) p. 17)
independent auditor  Certified public accountant licensed to perform audits who is independent of the company being audited.
(See page(s) p. 71)
indirect method  Method of preparing the statement of cash flows that uses the net income from the income statement as a starting point for the reporting of cash flow from operating activities. The adjustments necessary to convert accrual-based net income to a cash-equivalent basis are shown in the operating activities section of the statement of cash flows.
(See page(s) p. 575)
intangible assets  Assets that may be represented by pieces of paper or contracts that appear tangible; however, the true value of an intangible asset lies in the rights and privileges extended to its owners.
(See page(s) p. 408)
interest  Fee paid for the use of borrowed funds; also refers to revenue from debt securities.
(See page(s) pp. 6, 285)
interest-bearing notes  Notes that require the payment of the face value plus accrued interest at maturity.
(See page(s) p. 376)
internal controls  A company’s policies and procedures designed to reduce the opportunity for fraud and to provide reasonable assurance that its objectives will be accomplished.
(See page(s) pp. 75, 316)
inventory  Supply of goods that is in the process of being made or is finished and ready for sale; also describes stockpiles of goods used in the business (office supplies, cleaning supplies).
(See page(s) p. 217)
inventory cost flow methods  Methods used to allocate the cost of goods available for sale between cost of goods sold and inventory.
(See page(s) p. 267)
inventory turnover  Ratio of cost of goods sold to inventory that indicates how many times a year the average inventory is sold (turned over).
(See page(s) p. 281)
investee  Company that receives assets or services in exchange for a debt or equity security.
(See page(s) p. 283)
investing activities  One of the three categories of cash inflows and outflows shown on the statement of cash flows; includes cash received and spent by the business on productive assets and investments in the debt and equity of other companies.
(See page(s) pp. 18, 562)
investment  Commitment of assets (usually cash) by a business to acquire other assets that will be used to produce revenue.
(See page(s) p. 63)
investment securities  Certificates that describe the rights and privileges that investors receive when they loan or give assets or services to investees.
(See page(s) p. 283)
investor  Company or individual who gives assets or services and receives a security certificate in exchange.
(See page(s) pp. 5, 283)
issued stock  Stock sold to the public.
(See page(s) p. 520)
issuer of a bond  Party that issues the bond (the borrower).
(See page(s) p. 68)
issuer of a note  Individual or business borrowing funds (the party receiving the cash when a note is issued).
(See page(s) p. 377)
journal  Book of original entry in which accounting data are entered chronologically before posting to the ledger accounts.
(See page(s) p. 169)
labor resources  Both intellectual and physical labor used in the process of converting goods and services to products of greater value.
(See page(s) p. 6)
last-in, first-out (LIFO) cost flow method  Inventory cost flow method that treats the last items purchased as the first items sold for the purpose of computing cost of goods sold.
(See page(s) p. 268)
ledger  Collection of all accounts used by a business; primary information source for the financial statements.
(See page(s) p. 168)
legal capital  Amount of assets that should be maintained as protection for creditors; the number of shares multiplied by the par value.
(See page(s) p. 519)
liabilities  Obligations of a business to relinquish assets, provide services, or accept other obligations.
(See page(s) p. 10)
limited liability  Concept that investors in a corporation may not be held personally liable for the actions of the corporation (the creditors cannot lay claim to the owners’ personal assets as payment for the corporation’s debts).
(See page(s) p. 516)
limited liability company (LLC)  Organizational form offering many of the best features of corporations and partnerships and with many legal benefits of a corporation (e.g., limited liability and centralized management) but permitted by the Internal Revenue Service to be taxed as a partnership, thereby avoiding double taxation of profits.
(See page(s) p. 516)
line of credit  Preapproved credit arrangement with a lending institution in which a business can borrow money by simply writing a check up to the approved limit.
(See page(s) p. 462)
liquidation  Process of dividing up the assets and returning them to the resource providers. Creditors normally receive first priority in business liquidations; in other words, assets are distributed to creditors first. After creditor claims have been satisfied, the remaining assets are distributed to the investors (owners) of the business.
(See page(s) p. 5)
liquidity  Ability to convert assets to cash quickly and meet short-term obligations.
(See page(s) pp. 18, 330)
long-term operational assets  Assets used by a business to generate revenue; condition of being used distinguishes them from assets that are sold (inventory) and assets that are held (investments).
(See page(s) p. 407)
losses  Decreases in assets or increases in liabilities that result from peripheral or incidental transactions.
(See page(s) p. 120)
lower-of-cost-or-market rule  Accounting principle of reporting inventories at market value if their value declined below their cost, regardless of the cause.
(See page(s) p. 277)
Management’s Discussion and Analysis (MD&A)  Section of the annual report that management uses to explain many different aspects of the company’s past performance and future plans.
(See page(s) p. 175)
managerial accounting  Branch of accounting that provides information useful to internal decision makers and managers in operating an organization.
(See page(s) p. 6)
manufacturing businesses  Makers of goods sold to customers.
(See page(s) p. 23)
market  Gathering of people or organizations for the purpose of buying and selling resources.
(See page(s) p. 4)
market interest rate  Current interest rate available on a wide range of alternative investments.
(See page(s) p. 474)
market value  Value at which securities sell in the secondary market; also called fair value.
(See page(s) pp. 284, 520)
marketable securities  Securities that are readily traded in the secondary securities market.
(See page(s) p. 284)
matching concept  Process of matching expenses with the revenues they produce; three ways to match expenses with revenues include matching expenses directly to revenues, matching expenses to the period in which they are incurred, and matching expenses systematically with revenues.
(See page(s) pp. 64, 114)
material error  Error or other reporting problem that, if known, would have influenced the decision of an average prudent investor.
(See page(s) p. 71)
materiality  Concept that recognizes practical limits in financial reporting by allowing flexible handling of matters not considered material; information is considered material if the decisions of a reasonable person would be influenced by its omission or misstatement.
(See page(s) p. 116)
merchandise inventory  Supply of finished goods held for resale to customers.
(See page(s) p. 217)
merchandising businesses  Companies that buy and sell merchandise inventory.
(See page(s) pp. 23, 217)
Modified Accelerated Cost Recovery System (MACRS)  Prescribed method of depreciation for tax purposes that provides the maximum depreciation expense deduction permitted under tax law.
(See page(s) p. 418)
mortgage bond  Type of secured bond that conditionally transfers title of a designated piece of property to the bondholder until the bond is paid.
(See page(s) p. 464)
multistep income statement  Income statement format that matches particular revenue items with related expense items and distinguishes between recurring operating activities and nonoperating items such as gains and losses.
(See page(s) p. 228)
natural resources  Mineral deposits, oil and gas reserves, and reserves of timber, mines, and quarries are examples; sometimes called wasting assets because their value wastes away as the resources are removed.
(See page(s) p. 408)
net assets  Portion of the assets remaining after the creditors’ claims have been satisfied (i.e., Assets _ Liabilities _ Net assets); also called equity or residual interest.
(See page(s) p. 10)
net income  Increase in net assets resulting from operating the business.
(See page(s) p. 17)
net income percentage  Another term for return on sales. Refer to return on sales for the definition.
(See page(s) p. 232)
net loss  Decrease in net assets resulting from operating the business.
(See page(s) p. 17)
net method  A method of accounting for cash discounts that records inventory purchases at the net price (the list price minus the purchase discount).
(See page(s) p. 223)
net realizable value  Face amount of receivables less an allowance for accounts whose collection is doubtful (amount actually expected to be collected).
(See page(s) pp. 360, 361)
net sales  Sales less returns from customers and allowances or cash discounts given to customers.
(See page(s) p. 232)
nominal accounts  Accounts that contain information applicable to a single accounting period (Revenues, Expenses and Dividends); sometimes called temporary accounts.
(See page(s) p. 61)
noncash investing and financing activities  Business transactions that do not directly affect cash, such as exchanging stock for land or purchasing property by using a mortgage and that are reported as both an inflow and outflow in a separate section of the statement of cash flows.
(See page(s) p. 562)
non-sufficient-funds (NSF) check  Customer’s check deposited but returned by the bank on which it was drawn because the customer did not have enough funds in its account to pay the check.
(See page(s) p. 323)
note payable  Liability that results from the execution of a legal document called a note that describes technical terms, including interest charges, maturity date, collateral, and so on.
(See page(s) p. 67)
notes receivable  Notes that evidence rights to receive cash in the future; usually specify the maturity date, rate of interest, and other credit terms.
(See page(s) p. 359)
not-for-profit entities  Organizations (also called nonprofit or nonbusiness entities) whose primary motive is something other than making a profit, such as providing goods and services for the social good. Examples include state-supported universities and colleges, hospitals, public libraries, and public charities.
(See page(s) p. 7)
operating activities  One of the three categories of cash inflows and outflows shown on the statement of cash flows; show the amount of cash generated by revenue and the amount of cash spent for expenses.
(See page(s) pp. 18, 562)
operating cycle  Time required to turn cash into inventory, inventory into receivables, and receivables back to cash.
(See page(s) pp. 330, 375)
operating income  Income determined by subtracting operating expenses from operating revenues. Gains and losses and other peripheral activities are added to or subtracted from operating income to determine net income or loss.
(See page(s) p. 121)
opportunity cost  Income given up by choosing one alternative over another; for example, the wage a working student forgoes to attend class.
(See page(s) p. 234)
outstanding checks  Checks deducted from the depositor’s cash account balance but not yet presented to the bank for payment.
(See page(s) p. 323)
outstanding stock  Stock owned by outside parties; normally the amount of stock issued less the amount of treasury stock.
(See page(s) p. 521)
Paid-in Capital in Excess of Par Value account  Account used to record any amount received above the par or stated value of stock when stock is issued.
(See page(s) p. 522)
par value  Arbitrary value assigned to stock by the board of directors.
(See page(s) p. 519)
parent company  Company that holds a controlling interest (more than 50 percent ownership) in another company.
(See page(s) p. 288)
partnership  Business entity owned by at least two people who share talents, capital, and the risks of the business.
(See page(s) p. 514)
partnership agreement  Legal document that defines the responsibilities of each partner and describes the division of income and losses.
(See page(s) p. 514)
patent  Legal right granted by the U.S. Patent Office ensuring a company or an individual the exclusive right to a product or process.
(See page(s) pp. 408, 423)
payables  Obligations to make future economic sacrifices, usually cash payments.
(See page(s) p. 359)
payment date  Date on which a dividend is actually paid.
(See page(s) p. 526)
period costs  Expenses matched to the period in which they are incurred regardless of when cash payments for them are made; costs that cannot be directly traced to products but are usually recognized as expenses in the period in which they are incurred.
(See page(s) pp. 102, 218)
periodic inventory system  Method of accounting for changes in the Inventory account only at the end of the accounting period.
(See page(s) p. 236)
peripheral (incidental) transactions  Transactions that do not arise from ordinary business operations.
(See page(s) p. 120)
permanent accounts  Accounts that contain information transferred from one accounting period to the next.
(See page(s) p. 61)
perpetual inventory system  Method of accounting for inventories that increases the Inventory account each time merchandise is purchased and decreases it each time merchandise is sold.
(See page(s) p. 220)
petty cash fund  Small amount of cash set aside in a fund to pay for small outflows for which writing checks is not practical.
(See page(s) p. 327)
petty cash voucher  A document prepared by the petty cash custodian that evidences a petty cash disbursement. The person who receives the cash signs the voucher as evidence of receiving the money. Supporting documents, such as an invoice, restaurant bill, or parking fee receipt, should be attached to the petty cash voucher.
(See page(s) p. 328)
physical flow of goods  Physical movement of goods through the business; normally a FIFO flow so that the first goods purchased are the first goods delivered to customers, thereby reducing the likelihood of obsolete inventory.
(See page(s) p. 268)
physical resources  Natural resources used in the transformation process to create resources of more value.
(See page(s) p. 6)
posting  Process of copying information from journals to ledgers.
(See page(s) p. 169)
preferred stock  Stock that receives some form of preferential treatment (usually as to dividends) over common stock; normally has no voting rights.
(See page(s) p. 521)
present value  Current value of some investment amount that is expected to be received at some specified future time.
(See page(s) p. 479)
price-earnings (P/E) ratio  Ratio of the selling price per share to the earnings per share; generally, a higher P/E ratio indicates that investors are optimistic about a company’s future.
(See page(s) p. 20)
primary securities market  Market made up of transactions between the investor and investee.
(See page(s) p. 284)
principal  Amount of cash actually borrowed.
(See page(s) p. 377)
procedures manual  Manual that sets forth the accounting procedures to be followed.
(See page(s) p. 317)
product costs  Inventory costs directly traceable to the product including the cost to acquire goods or make them ready for sale.
(See page(s) p. 218)
productive assets  Assets used to operate the business; frequently called long-term assets.
(See page(s) p. 18)
profit  Value created by transforming goods and services to more desirable states.
(See page(s) p. 4)
property, plant, and equipment  Category of assets, sometimes called plant assets, used to produce products or to carry on the administrative and selling functions of a business; includes machinery and equipment, buildings, and land.
(See page(s) p. 408)
purchase discount  Reduction in the gross price of merchandise extended under the condition that the purchaser pay cash for the merchandise within a stated time (usually within 10 days of the date of the sale).
(See page(s) p. 223)
qualified opinion  Opinion issued by a CPA that falls between an unqualified opinion (see later definition) and an adverse opinion; means that for the most part, the company’s financial statements are in compliance with GAAP, but the auditors have reservations about something in the statements or have other reasons not to give a fully unqualified opinion; reasons that a qualified opinion is being issued are explained in the auditor’s report.
(See page(s) p. 73)
realization  A term that usually refers to transactions that involve the collection or payment of cash.
(See page(s) p. 55)
recognition  Reporting an accounting event in the financial statements.
(See page(s) p. 55)
relative fair market value method  Method of assigning value to individual assets acquired in a basket purchase in which each asset is assigned a percentage of the total price paid for all assets. The percentage assigned equals the market value of a particular asset divided by the total of the market values of all assets acquired in the basket purchase.
(See page(s) p. 409)
reliability concept  Information is reliable if it can be independently verified. Reliable information is factual rather than subjective.
(See page(s) p. 14)
reporting entities  Particular businesses or other organizations for which financial statements are prepared.
(See page(s) p. 8)
residual interest  Portion of the assets remaining after the creditors’ claims have been satisfied (Assets _ Liabilities _ Residual Interest); also called equity or net assets.
(See page(s) p. 10)
restrictive covenants  Special provisions specified in the loan contract that are designed to prohibit management from taking certain actions that place creditors at risk.
(See page(s) p. 462)
retail companies  Companies that sell goods to consumers.
(See page(s) p. 217)
retained earnings  Increase in equity that results from the retention of assets obtained through the operation of the business.
(See page(s) p. 11)
return on assets ratio  Ratio that measures the relationship between the level of net income and the size of the investment in assets.
(See page(s) p. 124)
return on equity ratio  Ratio that measures the relationship between the amount of net income and the stockholders’ equity of a company.
(See page(s) p. 126)
return on sales  Percent of net income generated by each $1 of sales; computed by dividing net income by net sales.
(See page(s) p. 232)
revenue  An economic benefit (an increase in assets or a decrease in liabilities) that is gained by providing goods and services to customers.
(See page(s) pp. 13, 76)
revenue transactions  Transactions completed in the process of operating a business that increase assets or decrease liabilities.
(See page(s) p. 564)
salaries payable  Amounts of future cash payments owed to employees for services that have already been performed.
(See page(s) p. 57)
sales discount  Cash discount extended by the seller of goods to encourage prompt payment. When the buyer of the goods takes advantage of the discount and pays less than the original selling price, the difference between the selling price and the cash collected is the sales discount.
(See page(s) p. 223)
salvage value  Expected selling price of an asset at the end of its useful life.
(See page(s) p. 410)
Sarbanes-Oxley Act of 2002  An act of Congress that was established to promote ethical behavior in corporate governance and fairness in financial reporting. Key provisions of the act include a requirement that a company’s chief executive officer (CEO) and chief financial officer (CFO) must certify in writing that they have reviewed the financial reports being issued, and that the reports present fairly the company’s financial status. An executive who falsely certifies the company’s financial reports is subject to significant fines and imprisonment. The act also establishes the Public Company Accounting Oversight Board (PCAOB). This Board assumes the primary responsibility for developing and enforcing auditing standards for CPAs who audit SEC companies. The Sarbanes-Oxley Act also prohibits auditors from providing most types of non-audit services to companies they audit.
(See page(s) p. 515)
schedule of cost of goods sold  Schedule that reflects the computation of the amount of the cost of goods sold under the periodic inventory system; an internal report not shown in the formal financial statements.
(See page(s) p. 236)
secondary securities market  Market in which securities are exchanged between investors.
(See page(s) p. 284)
secured bonds  Bonds secured by specific identifiable assets.
(See page(s) p. 464)
Securities Act of 1933 and Securities Exchange Act of 1934  Acts passed after the stock market crash of 1929 designed to regulate the issuance of stock and govern the stock exchanges; created the Securities and Exchange Commission (SEC), which has the authority to establish accounting policies for companies registered on the stock exchanges.
(See page(s) p. 515)
Securities and Exchange Commission (SEC)  Government organization responsible for overseeing the accounting rules to be followed by companies required to be registered with it.
(See page(s) p. 176)
selling and administrative costs  Costs that cannot be directly traced to products that are recognized as expenses in the period in which they are incurred. Examples include advertising expense and rent expense.
(See page(s) p. 218)
separation of duties  Internal control feature of, whenever possible, assigning the functions of authorization, recording, and custody to different individuals.
(See page(s) p. 316)
serial bonds  Bonds that mature at specified intervals throughout the life of the total issue.
(See page(s) p. 464)
service businesses  Organizations—accountants, lawyers, and dry cleaners—that provide services to consumers.
(See page(s) p. 23)
service charges  Fees charged by a bank for services performed or a penalty for the depositor’s failing to maintain a specified minimum cash balance throughout the period.
(See page(s) p. 323)
shrinkage  A term that reflects decreases in inventory for reasons other than sales to customers.
(See page(s) p. 230)
signature card  Bank form that records the bank account number and the signatures of the people authorized to write checks on an account.
(See page(s) p. 321)
simple interest  Interest computed by multiplying the principal by the interest rate by the number of periods. Interest earned in a period is not added to the principal, so that no interest is earned on the interest of previous periods.
(See page(s) p. 478)
single-step income statement  Single comparison between total revenues and total expenses.
(See page(s) p. 228)
sinking fund  Fund to which the bond issuer annually contributes to ensure the availability of cash for the payment of the face amount on the maturity date.
(See page(s) p. 464)
sole proprietorship  Business (usually small) owned by one person.
(See page(s) p. 514)
solvency  Ability of a business to pay liabilities in the long run.
(See page(s) p. 330)
source document  Document such as a cash register tape, invoice, time card, or check stub that provides accounting information to be recorded in the accounting journals and ledgers.
(See page(s) p. 169)
special journals  Journals designed to improve the efficiency of recording specific types of repetitive transactions.
(See page(s) p. 169)
specific authorizations  Policies and procedures that apply to designated levels of management, such as the policy that the right to approve overtime pay may apply only to the plant manager.
(See page(s) p. 317)
specific identification  Inventory method that allocates costs between cost of goods sold and ending inventory using the cost of the specific goods sold or retained in the business.
(See page(s) p. 268)
spread  Difference between the rate a bank pays to obtain money (e.g., interest paid on savings accounts) and the rate that the bank earns on money it lends to borrowers.
(See page(s) p. 475)
stakeholders  Parties interested in the operations of a business, including owners, lenders, employees, suppliers, customers, and government agencies.
(See page(s) p. 3)
stated interest rate  Rate of interest specified in the bond contract that will be paid at specified intervals over the life of the bond.
(See page(s) p. 464)
stated value  Arbitrary value assigned to stock by the board of directors.
(See page(s) p. 520)
statement of activities  Statement that reports the revenues, expenses, gains, and losses that increase or decrease the net assets of a not-for-profit organization.
(See page(s) p. 533)
statement of cash flows  Statement that explains how a business obtained and used cash during an accounting period.
(See page(s) pp. 18, 533)
statement of changes in stockholders’ equity  Statement that summarizes the transactions occurring during the accounting period that affected the owners’ equity
(See page(s) p. 17)
statement of financial position  Statement that reports the assets, liabilities, and net assets of a not-for-profit organization.
(See page(s) p. 533)
statements model  Simultaneous representation of a set of financial statements.
(See page(s) p. 14)
stock certificate  Evidence of ownership interest issued when an investor contributes assets to a corporation; describes the rights and privileges that accompany ownership.
(See page(s) p. 514)
stock dividend  Proportionate distribution of additional shares of the declaring corporation’s stock.
(See page(s) p. 527)
stockholders  Owners of a corporation.
(See page(s) pp. 11, 517)
stockholders’ equity  Stockholders’ equity represents the portion of the assets that is owned by the stockholders.
(See page(s) p. 11)
stock split  Proportionate increase in the number of outstanding shares; designed to reduce the market value of the stock and its par value.
(See page(s) p. 527)
straight-line amortization  Method of amortization that allocates bond discount or premium in equal amounts to each period over the life of the bond.
(See page(s) p. 471)
straight-line depreciation  Method of computing depreciation that allocates the cost of an asset to expense in equal amounts over its life.
(See page(s) p. 410)
straight-line method  Allocation method computed by subtracting the salvage value from the cost and then dividing by the number of years of useful life.
(See page(s) p. 112)
subordinated debentures  Unsecured bonds that have a lower priority than general creditors, that is, are paid off after the general creditors are paid in the case of liquidation.
(See page(s) p. 464)
subsidiary company  Company controlled (more than 50 percent owned) by another company.
(See page(s) p. 288)
systematic allocation of cost  Process of spreading the cost of an asset over several accounting periods in an orderly manner.
(See page(s) p. 114)
T-account  Simplified account form, named for its shape, with the account title placed at the top of a horizontal bar, debit entries listed on the left side of the vertical bar, and credit entries shown on the right side.
(See page(s) p. 156)
T-account method  Method of determining net cash flows by analyzing beginning and ending balances on the balance sheet and inferring the period’s transactions from the income statement.
(See page(s) p. 564)
tangible assets  Assets that can be touched, such as equipment, machinery, natural resources, and land.
(See page(s) p. 408)
temporary accounts  Accounts used to collect information for a single accounting period (usually revenue, expense, and distribution accounts).
(See page(s) p. 61)
term bonds  Bonds in an issue that mature on a specified date in the future.
(See page(s) p. 464)
time value of money  Recognition that the present value of a promise to receive a dollar some time in the future is worth less than a dollar. For example, a person may be willing to pay $0.90 today for the right to receive $1.00 one year from today.
(See page(s) p. 478)
times interest earned ratio  Ratio that computes how many times a company would be able to pay its interest by using the amount of earnings available to make interest payments; amount of earnings is net income before interest and income taxes.
(See page(s) p. 477)
trademark  Name or symbol that identifies a company or an individual product.
(See page(s) p. 423)
trading securities  Securities bought and sold to generate profit from short-term appreciation in stock and bond prices.
(See page(s) p. 284)
transaction  Particular event that involves the transfer of something of value between two entities.
(See page(s) p. 11)
transferability  Concept referring to the practice of dividing the ownership of corporations into small units that are represented by shares of stock, which permits the easy exchange of ownership interests.
(See page(s) p. 517)
transportation-in (freight-in)  Cost of freight on goods purchased under terms FOB shipping point that is usually added to the cost of inventory and is a product cost.
(See page(s) p. 224)
transportation-out (freight-out)  Freight cost for goods delivered to customers under terms FOB destination; a period cost expensed when it is incurred.
(See page(s) p. 224)
treasury stock  Stock first issued to the public and then bought back by the corporation.
(See page(s) p. 520)
trial balance  List of ledger accounts and their balances that provides a check on the mathematical accuracy of the recording process.
(See page(s) p. 173)
true cash balance  Actual balance of cash owned by a company at the close of business on the date of the bank statement.
(See page(s) p. 322)
2/10, n/30  Term indicating that the seller will give the purchaser a 2 percent discount on the gross invoice price if the purchaser pays cash for the merchandise within 10 days from the date of purchase.
(See page(s) p. 223)
unadjusted bank balance  Ending cash balance reported by the bank as of the date of the bank statement.
(See page(s) p. 322)
unadjusted book balance  Balance of the Cash account as of the date of the reconciliation before making any adjustments.
(See page(s) p. 322)
unearned revenue  Revenue for which cash has been collected but the service has not yet been performed.
(See page(s) p. 110)
units-of-production depreciation  Depreciation method based on a measure of production rather than a measure of time; for example, an automobile may be depreciated based on the expected miles to be driven rather than on a specific number of years.
(See page(s) pp. 410, 416)
unqualified opinion  Opinion on financial statements audited by a CPA that means the auditor believes the financial statements are in compliance with GAAP.
(See page(s) p. 72)
unrealized gain or loss  Paper gain or loss on investment securities that has not yet been realized and is not realized until the securities are sold or otherwise disposed of.
(See page(s) p. 285)
unsecured bonds  Also known as debentures, bonds issued on the general credit of the organization.
(See page(s) p. 464)
unsubordinated debentures  Unsecured bonds that have equal claims with the general creditors.
(See page(s) p. 464)
users  Individuals or organizations that use financial information for decision making.
(See page(s) p. 3)
variable interest rate  Interest rate that fluctuates (may change) from period to period over the life of the loan.
(See page(s) p. 459)
vertical statements model  Arrangement of a full set of financial statements on a single page with account titles arranged from the top to the bottom of the page.
(See page(s) p. 69)
voluntarily disclosing  Professional responsibility to clients that forbids CPAs from voluntarily disclosing information obtained as a result of their client–accountant relationships.
(See page(s) p. 73)
warranty  Promise to correct a deficiency or dissatisfaction in quality, quantity, or performance of a product or service sold.
(See page(s) p. 370)
weighted-average cost flow method  Inventory cost flow method in which the cost allocated between inventory and cost of goods sold is based on the average cost per unit, which is determined by dividing total costs of goods available for sale during the accounting period by total units available for sale during the period. If the average is recomputed each time a purchase is made, the result is called a moving average.
(See page(s) p. 268)
wholesale companies  Companies that sell goods to other businesses.
(See page(s) p. 217)
withdrawals  Distributions to the owners of proprietorships and partnerships.
(See page(s) p. 518)







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