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.
Accrued charges represent obligations for goods or services that have been received or consumed but not yet paid for by the end of the accounting period.
An accrued expense is a cost that has been incurred but not yet paid. These are obligations that a company must pay out in the future for services or goods that have already been received.
Accrued liabilities are expenses that a company has recognized in the books before it has paid them. This concept is integral to the accrual method of accounting which emphasizes recognizing economic events regardless of cash transactions.
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).
Balance sheet reserves are amounts set aside in pension plans and other insurance contracts, expressed as liabilities on the company's balance sheet, to ensure future benefit payments to policy owners.
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.
An important liquidity ratio indicating the extent of a bank's cash reserves relative to its total liabilities. Essential for ensuring a bank's ability to meet short-term obligations.
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.
Cost of funds refers to the interest cost paid by a financial institution for the use of money, including various liabilities such as money market accounts, passbook savings accounts, and CDs.
A credit balance is an accounting term that refers to the situation where the total of credit entries in an account exceeds the total of debit entries. These balances typically represent revenue, liabilities, or capital.
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.
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 losses or additional charges imposed on an individual or entity for failing to meet specific obligations or conditions in a financial or contractual agreement.
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.
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.
Identifiable assets and liabilities, also known as separable assets and liabilities, are those parts of a business that can be disposed of separately without having to dispose of the entire business. They play a crucial role in financial accounting and business valuation.
Interest-Rate Risk, also known as interest-rate exposure, refers to the risk arising from changes in interest rates. These changes can impact the value of fixed-interest assets and liabilities, cause mismatches in asset-liability repricing, and influence prepayment and reinvestment activities.
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 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 payable is an amount that is owed by a company to its suppliers or creditors, typically from the purchase of supplies or inventory (accounts payable), but it can also include amounts owed for other purposes such as bank loans (bank loans payable).
Money or other costs one will pay for breaking a law or violating part or all of the terms of a contract. Penalties are often imposed for prepaying a loan, failing to complete a contract sale, or breaking a lease; penalties are not tax deductible.
A detailed document that provides an individual's financial health using often the accrual basis of accounting.
Preference share capital refers to the portion of a company's capital that comes from issuing preference shares, which give holders preferential dividends but typically lack voting rights.
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.
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.
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 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.
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.
