Synthesis

accounts receivable
Claims against a debtor; usually arising from sales or services rendered, not necessarily due or past due; normally, a current asset. With the word gross, the amount owed to the holder; with the word net, the amount the holder expects to collect, which equals the gross amount less the allowance for uncollectible accounts.
Accumulated depreciation
A preferred title for the asset contra account that shows the sum of depreciation charges on an asset since the time the firm acquired it. Other account titles are allowance for depreciation (acceptable term) and reserve for depreciation (unacceptable term).
Comprehensive income
Defined in SFAC No. 3 as "the change in equity (net assets) of an entity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.”
conditions Expense recognition
external reporting
Consistency
Treatment of like transactions in the same way in consecutive periods so that financial statements will be more comparable than otherwise; the reporting policy implying that a reporting entity, once it adopts specified procedures, should follow them from period to period. See accounting changes for the treatment of inconsistencies.
Debt retirement
The issuer of debt gives cash or shares or other assets to the holder of the obligation and then removes the associated liability from the balance sheet.
Diluted earnings per share
For common stock, smallest earnings per share figure that one can obtain by computing an earnings per share for all possible combinations of assumed exercise or conversion of potentially dilutive securities.
Effective interest method
In computing interest expense (or revenue), a systematic method that makes the interest expense (revenue) for each period divided by the amount of the net liability (asset) at the beginning of the period equal to the yield rate on the liability (asset) at the time of issue (acquisition). Interest for a period is the yield rate (at time of issue) multiplied by the net liability (asset) at the start of the period. The amortization of discount or premium is the plug to give equal debits and credits. (Interest expense is a debit, and the amount of debt service payment is a credit.)
Faithful representation
From the conceptual frameworks developed by the FASB and IASB, a qualitative characteristic of decision-useful information. A faithful representation means that the words and numbers used to depict an economic phenomenon in financial reports correspond to the phenomenon being depicted. A perfectly faithful representation would be complete, neutral, in the sense of being unbiased, and free from error.
Financial assets at fair value through profit or loss
IFRS term for trading securities.
loss on marketable equity securities sale Generally accepted accounting principle (U.S. GAAP); International Financial Reporting Standards (IFRS)
A claim to assets; a source of assets. SFAC No. 3 defines equity as "the residual interest in the assets of an entity that remains after deducting its liabilities." Thus, many knowledgeable people use "equity" to exclude liabilities and count only owners' equities. We prefer to use the term to mean all liabilities plus all owners' equity because there is no other single word that serves this useful purpose. We fight a losing battle.
Materiality
The concept that accounting should disclose separately only those events that are relatively important (no operable definition yet exists) for the business or for understanding its statements. SFAC No. 2 suggests that accounting information is material if "the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.” The SEC's SAB 99 provides the current rule on materiality, based on SFAC No. 2.
Prepaid assets
Deferred charges; assets representing expenditures for future benefits. Rent and insurance premiums paid in advance are usually current prepayments.
Product life cycle
Time span between initial concept (typically starting with research and development) of a good or service and the time when the firm ceases to support customers who have purchased the good or service.
Statement of cash flows
A schedule of cash receipts and payments, classified by investing, financing, and operating activities; required by the FASB for all for-profit companies. Companies may report operating activities with either the direct method (which shows only receipts and payments of cash) or the indirect method (which starts with net income and shows adjustments for revenues not currently producing cash and for expenses not currently using cash). Cash includes cash equivalents such as Treasury bills, commercial paper, and some marketable securities held as current assets (not as investments). This is sometimes called the funds statement. Before 1987, the FASB required the presentation of a similar statement called the statement of changes in financial position, which tended to emphasize working capital, not cash.
T-account work sheet
A group of T-accounts used to work problems or to construct a statement of cash flows.
Trading securities
Marketable securities that a firm holds and expects to sell within a relatively short time; a classification important in SFAS No. 115 (Codification Topic 320), which requires the owner to carry marketable equity securities on the balance sheet at market value, not at cost. Contrast with available for sale, securities and held-to-maturity securities. Under SFAS No. 115 (Codification Topic 320), the balance sheet reports trading securities at market value on the balance sheet date, and the income statement reports holding gains and losses on trading securities. When the firm sells the securities, it reports realized gain or loss as the difference between the selling price and the market value at the last balance sheet date.
treasury stock
Treasury shares.
warranty liability
Account title in U.S. GAAP (IFRS) for the estimated cost to satisfy warranties.