Reading Financial Reports For Dummies, 3rd Edition

Appendix

Glossary

accounts payable: An account that tracks the money a company owes to its suppliers, vendors, contractors, and others who provide goods and services to the company.

accounts receivable: An account that tracks individual customer accounts, listing money that customers owe the company for products or services they've purchased.

accrual accounting: An accounting method in which a company records revenues and expenses when the actual transaction is completed rather than when cash is received or paid out.

accrued liabilities: The expenses a company has incurred but not yet paid for at the time the company closes its accounting books for the period to prepare its financial statements.

amortize: To reduce the value of an intangible asset by a certain percentage each year to show that it's being used up.

arm's length transaction: A transaction that involves a buyer and a seller who can act independently of each other and have no financial relationship with each other.

assets: Things a company owns, such as buildings, inventory, tools, equipment, vehicles, copyrights, patents, furniture, and any other items it needs to run the business.

audit: The process by which a certified public accountant verifies that a company's financial statements have met the requirements of the generally accepted accounting principles.

auditors’ report: A letter from the auditors stating that a company's financial statements have been completed in accordance with the generally accepted accounting ...