Key Terms
Accounts payable (A/P). Money owed by the firm to suppliers.
Accounts receivable (A/R). Money owed to a company for goods or services sold.
Accrual accounting. An accounting method whereby revenue and expenses are booked when they are incurred, regardless of when they are actually received or paid. Revenues are recognized during the period in which the sales activity occurred; expenses are recognized in the same period as their associated revenues.
Accruals. An amount incurred as an expense in a given accounting period—but not paid by the end of that period.
Acid-test ratio. See quick ratio.
Activity-based costing (ABC). An approach to cost accounting that focuses on the activities or cost drivers required to produce each product ...
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