Accounts receivable (AR) refers to the balance of money owed to a firm for goods or services delivered or used but not yet paid for by customers. It is an essential component of a company’s balance sheet and is considered a current asset.
Asset classification refers to the systematic categorization of assets on a balance sheet, distinguishing between fixed and current assets as mandated by the Companies Act and Financial Reporting Standard (FRS 102) in the UK and Republic of Ireland.
The value of an asset as represented on the balance sheet, detailing how various types of assets are recorded considering depreciation, amortization, and valuation methods like fair value accounting.
Balance-Sheet Total refers to the total net worth of an organization, encompassing both fixed and current assets minus long-term liabilities. It is an important metric in financial reporting and is particularly relevant in the qualification criteria for small and medium-sized company exemptions.
Bills Receivable refers to a category of current assets on a company’s balance sheet, representing promissory notes or bills of exchange held by the company until their maturity.
Cash at Bank refers to the total amount of money held in bank accounts by an individual or company. This can be in the form of current accounts or deposit accounts and is reflected in the balance sheet under current assets.
Circulating assets, also known as current assets, are the assets that a company expects to convert into cash, sell, or consume within one year or its operating cycle, whichever is longer.
Closing stock refers to the inventory remaining within an organization at the end of an accounting period, including raw materials, work in progress, or finished goods. It plays a crucial role in determining the profitability and financial status of a company.
Current assets, also known as circulating assets, circulating capital, or floating assets, are the assets of an organization that form part of the working capital and are constantly changing their form as they circulate from cash to goods and back to cash again.
The ratio of a business's current assets to its current liabilities, expressed as x:1. This metric helps gauge the liquidity of a company, indicating its ability to meet short-term obligations.
A ratio that demonstrates the ability of a business to satisfy its current debts by calculating the time for which it can operate on current liquid assets, without needing revenue from the next period's sales.
Floating Assets, also known as Current Assets, are the assets in a company's possession that is expected to be converted into cash within a year.
The presentation of a financial statement in which the debits are given on one side of the statement and the credits on the other. In the case of a balance sheet, the fixed assets and current assets would be shown on the left-hand side of the statement, and the capital and liabilities on the right-hand side.
Inventory includes the raw materials, work-in-progress, and finished goods that a company has on hand at any given time. Effective inventory management is crucial for maintaining liquidity and profitability.
A critical measure used to assess a company's short-term liquidity, focusing on the ability to cover current liabilities with liquid assets.
The Liquidity Index measures a company's liquidity by calculating the number of days it would take for current assets to be converted into cash, providing insights into financial stability and operational efficiency.
Long-term debtors refer to individuals or entities that owe money to an organization but are not expected to make payment within the near future, typically beyond a 12-month period.
The method of valuing current assets and work in progress as required by UK generally accepted accounting practice and the Companies Act; however they are measured in a company's management accounts.
Negative working capital occurs when a company's current liabilities exceed its current assets, raising concerns about its ability to meet short-term obligations and threatening its operational viability.
Net current assets, also known as working capital, refer to the excess of current assets over current liabilities and represent the capital available to run day-to-day operations within a business.
Net Working Capital (NWC) is a financial metric that represents the difference between a company's current assets and its current liabilities. It highlights a firm's short-term financial health and operational efficiency.
Prepaid expenses refer to amounts that are paid prior to the period they cover, such as insurance and rent. These expenses are assets on the balance sheet and become tax deductible during the appropriate period.
A prepayment, also referred to as a payment in advance, is a payment made for goods or services before they are actually received. In accounting, it is treated as a deferred debit under the accruals concept and is shown as a debit balance under debtors in the current assets section of the balance sheet.
Property, Plant, and Equipment (PP&E) are tangible fixed assets used in operating a business. This category includes land, buildings, machinery, fixtures, and other types of equipment that are expected to be used over multiple accounting periods.
A quick asset is any asset that can be converted into cash within a short timeline, typically 90 days or less.
The inventory of raw materials held at a specified time, which appears on the balance sheet under the heading of current assets.
Receivables represent the amount of money owed to a business by its customers for goods or services delivered or used but not yet paid for. These are current assets recorded on the balance sheet, reflecting the business's right to receive payment.
Replacement cost is the cost of replacing an asset, either in its present physical form or as the cost of obtaining equivalent services. This valuation method helps companies determine the expense of acquiring new or similar assets.
The term 'short term' refers to various financial concepts that involve a period of one year or less. This includes assets, liabilities, investments, and taxation definitions.
Trade receivables, also known as accounts receivable or trade debtors, represent amounts owed to a business by its customers for invoiced amounts. These are classified as current assets on the balance sheet but are separate from prepayments and other non-trade debtors. A provision for bad debts is often shown against the trade receivables balance as per the prudence concept. This provision is based on the company's historical data of bad debts and its current expectations.
Working capital is essential for financing the day-to-day operations of a company, calculated as the difference between current assets and current liabilities.
