Glossary*
Accounts payable Current liabilities on the balance sheet, representing short-term obligations to pay suppliers.
Accounts receivable Current assets on the balance sheet, representing short-term amounts due from customers who have purchased on account.
Accrual accounting Recording of revenue when earned and expenses when incurred, irrespective of the dates on which the associated cash flows occur.
Accumulated depreciation Sum total of all depreciation expenses recognized to date on a depreciable fixed asset.
Additional paid-in capital Any payment received from investors for stock that exceeds the par value of the stock.
Allowance for bad debts An offset to the accounts receivable balance, against which bad debts are charged. This allowance is used to avoid severe changes in the period-to-period bad debt expense by expensing a steady amount to the allowance account in every period, rather than writing off large bad debts to expense on an infrequent basis.
Amortization Write-off of an asset over the period when the asset is used. This term is most commonly applied to the gradual write-down of intangible items, such as goodwill or organizational costs.
Asset A resource, recorded through a transaction, that is expected to yield a benefit to a company.
Average inventory The beginning inventory for a period, plus the amount at the end of the period, divided by two. It is most commonly used in situations in which just using the period-end inventory yields highly variable results ...
