The Accounting Equation forms the foundation of the balance sheet and illustrates how assets, liabilities, and equity are interrelated, ensuring that the balance sheet remains balanced.
Asset deficiency is a financial condition where a company's liabilities exceed its assets, raising concerns about the organization's financial viability.
The balance sheet, also known as the statement of financial position, is a vital financial statement that outlines a company's total assets and liabilities at a specific point in time, providing a snapshot of its financial health.
Also known as the accounting equation, the balance sheet equation is the foundational formula that forms the basis of double-entry bookkeeping: Assets = Liabilities + Equity. This equation ensures that a company's financial statements are balanced, indicating that all resources (assets) owned by the company are financed either by borrowing (liabilities) or by investing funds (owner’s equity).
In finance and accounting, 'capital' refers to various forms of assets, interests, or financial contributions that play a critical role in the functioning of an entity or the production process, enhancing productivity and enabling operations.
The balance-sheet value of an asset or liability, representing the amount at which it is reported on the financial statements.
A cash-generating unit (CGU) is a subset of assets, liabilities, and associated goodwill within a reporting entity that contributes to generating cash inflows in a largely independent manner from other parts of the organization.
A consolidated financial statement brings together all assets, liabilities, and other operating accounts of a parent company and its subsidiaries, providing an integrated view of the entire corporate group’s financial status.
A credit entry is made on the right-hand side of an account, representing an increase in a liability, revenue, or equity item, or a decrease in an asset or expense.
In continuously contemporary accounting, Current Cash Equivalent (CCE) refers to the measure of assets and liabilities in terms of their current cash value.
A debit balance is the balance of an account where the total debit entries exceed the total credit entries. This typically indicates expenditures or assets on a company's financial statements.
An essential accounting term used in double-entry bookkeeping to record increases in assets or expenses and decreases in liabilities, revenues, or equity.
Deficit Net Worth, also known as negative net worth, occurs when a company's liabilities exceed its assets and capital stock, often due to operating losses.
The removal from the balance sheet of assets and liabilities that had previously been recognized in the financial statements of a company.
The financial position of a firm reflects the status of its assets, liabilities, and equity accounts as of a certain time. This is depicted on its financial statement and is also known as financial condition.
The Free Asset Ratio is a key metric in the insurance industry, quantifying the market value of an insurance company's assets relative to its liabilities. It is used to gauge the financial health and stability of the insurer.
High-Net-Worth Individuals (HNWIs) are individuals who possess very high net incomes, substantial net assets, or a combination of both. These individuals typically qualify for specialized financial products and services aimed at optimizing their wealth, despite the elevated investment risks involved.
Denoting the position of a company lacking sufficient cash, or assets that can be quickly converted into cash, to meet the demands of creditors.
Liquidating value refers to the projected price for an asset of a company that is going out of business, such as a real estate holding or office equipment. This value is often distinguished from the going-concern value, which may be higher due to factors such as organization value or goodwill.
Market Value is a financial metric that measures the value of an asset or company determined by the current market price of its shares or assets. Distinguished from book value, it reflects real-time valuation and investor sentiment.
An individual whose overall assets exceed $1 million but are not liquid cash. These assets could be in the form of securities, real estate, or other investments.
An economic measure that represents the sum total of the value of all capital and goods held within a nation. It encompasses the net value of all assets owned by residents and businesses of a country at a particular time.
Negative Net Worth, also referred to as Deficit Net Worth, occurs when an individual's or a company's liabilities exceed their assets. This financial condition indicates that the value of obligations outweighs the owned resources.
Net Assets represent the total assets of an organization minus its liabilities and are crucial for evaluating the financial position and stability of a company.
Net Realizable Value (NRV) is the estimated selling price of goods, services, or assets minus any costs associated with making the sale, including completion and disposal costs.
Net worth represents the total value of an organization after deducting its liabilities from its assets. This financial metric is crucial for assessing the financial health and stability of an entity.
Off-balance-sheet (OBS) refers to assets or liabilities that do not appear on a company's balance sheet but potentially have a significant impact on the company's financial health.
Opening entries are unique journal entries created when a business starts up, capturing all assets, liabilities, and owners' equity as a beginning point for accounting records.
A detailed document that provides an individual's financial health using often the accrual basis of accounting.
Personalty, also known as personal property, refers to any movable property that is not affixed to land or real estate. It includes items such as cash, furniture, vehicles, and other tangible objects.
Plant assets, also known as fixed assets, are composed of land, buildings, machinery, furniture, fixtures, and other equipment permanently employed in business operations. In some contexts, the term 'plant' may refer specifically to buildings or land and buildings.
A type of preferred stock that has a higher claim on assets and dividends compared to other issues of preferred stock or common stock, often referred to as preference shares.
Financial metrics used to measure a company's ability to generate profit relative to other key variables, such as sales, assets, or equity.
Accounting records that are sufficient to show and explain an organization's transactions, enabling a company to disclose its financial position accurately and comply with statutory regulations.
Purchase accounting, also known as acquisition accounting, is the method used in financial accounting to consolidate the financial statements of two companies when one company acquires another. It involves revaluing the acquired company's assets and liabilities to fair value and recognizing goodwill, if any, in the consolidated financial statements.
Real accounts refer to ledger accounts used to record property, plant, equipment, and other assets, distinguishing them from nominal accounts which track revenues and expenses.
A realizable account is an account prepared when a partnership is dissolved. It accounts for the assets of the partnership, expenses on realization, and proceeds from sales, with the resulting profit or loss shared between the partners according to their profit-sharing ratio.
Receivership is a process where an appointed receiver manages a company's assets to repay debt owed to a lender due to the company's default or insolvency.
The recoverable amount represents the value of an asset that is treated as the greatest of its net realizable value and its value in use.
A secured creditor holds a financial interest, either through a fixed or floating charge, over the assets of a debtor, providing a level of security for the creditor's investment by granting the right to seize or sell these assets if the debtor defaults.
A comprehensive document that outlines a debtor's assets, liabilities, and creditor details in the context of bankruptcy proceedings, essential for assessing financial status during insolvency.
In accounting, the Statement of Financial Position is an important financial statement that provides a snapshot of a company's financial health at a specific point in time. It is often referred to as a balance sheet and is critical for understanding the assets, liabilities, and equity of a business.
A stock represents ownership in a company and constitutes a claim on part of the company's assets and earnings. Stocks can come in diverse forms such as fixed-interest securities or ordinary shares.
A substantive test in auditing is employed to verify the existence, ownership, and valuation of assets and liabilities, often used to perform a balance-sheet audit or gather general audit evidence.
Surplus refers to any excess amount over what is needed, particularly in finance and corporate accounting. It denotes assets that remain after liabilities, debts, and capital stock have been deducted.
Unrealized appreciation refers to the increase in the value of an asset that has not yet been sold, calculated as the excess of the asset's fair market value over its adjusted basis. This appreciation is recognized for financial reporting purposes but does not incur income tax until the asset is sold.
Wealth refers to the value of all assets owned by an individual or entity, minus all outstanding debts. It serves as a stock measure of financial well-being, distinct from income, which is a flow measure of financial performance over a period.
