(US Only) A form of accelerated depreciation enacted by the US Congress in 1981 and modified in 1986. The 1986 modification, known as MACRS (Modified ACRS), is currently applied by many US companies to a class of assets that includes computing equipment (See Depreciation schedule).

The place for recording changes in value (additions and subtractions) related to a single asset, liability, or owner's equity item, including revenues and expenses. In a company's general ledger, for instance, there may be separate accounts for such things as computing equipment, professional salaries, electricity expense, as well as cash and accounts receivable.

A liability representing an amount owed to a creditor usually arising from purchase of merchandise, materials, or supplies. Accounts Payable (the sum of all account payable items) is normally shown on the balance sheet as a current liability.

An amount that is owed to an entity, usually by one of its customers as a result of a recent sale or the ordinary extension of credit. A company that has sold and shipped goods to a customer, and sent an invoice, has an account receivable if the customer has not actually paid yet. Normally shown on the balance sheet as a current asset.

The American Accounting Association (AAA) defines Accounting as the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information. The term financial accounting usually means providing information to those outside the entity (such as stockholders, regulatory organizations, and creditors), while managerial accounting refers to this information prepared for those inside the entity.

The sequence of accounting procedures starting with journal entries for various transactions and ending with the financial statements. The journal normally record transactions as they occur, in the order they occur. Journal entries are regularly posted to a ledger, which organizes entries by account, and which contains all accounts used by the company or other entity. The sum of account activity is analyzed and summarized periodically (e.g., monthly, quarterly, or annually) in financial statements such as the balance sheet, income statement, and cash flow statements. See also general ledger.

Assets = Liabilities + Owner's Equity

The three elements of this equation assets, liabilities, and owner's equity are the three major sections of the balance sheet. The term accounting equation is sometimes extended to include another fundamental rule that applies to every accounting transaction.

Debits = Credits

See also double entry system, credit, and debit.

The period over which an income statement summarizes earnings and changes in owner's equity. Usually the official period is one year, but income statements are also prepared for shorter or interim periods. Most publicly-held companies publish financial statements quarterly as well as annually. See fiscal year.

Accounting for revenues in the period in which they are earned and for expenses in the period in which they are incurred. Under accrual accounting, for instance, a sale is recorded as revenue even if the customer has not yet paid (the revenue is part of accounts receivable). This is normal accounting practice. Accrual accounting contrasts with cash accounting, which accounts only for cash receipts and payments, and which is usually not acceptable for accounting purposes.

An unpaid expense resulting in an accrued liability.

A liability that arises because an expense occurs in a period prior to the related cash payment.

An account showing the total amount of depreciation of an asset that has been accumulated to date. It is subtracted from the initial cost of the asset, and the difference appears on the balance sheet as the asset's book value.

See quick ratio.

See contributed capital.

An expense related to the enterprise as a whole, as opposed to expenses related to specific functions such as manufacturing. Administrative Expense is the "A" of the major income statement cost/expense category "SG & A" (See Selling, general, and administrative expenses).

An auditor's opinion stating that the financial statements are not fair or not in accord with the generally accepted accounting principles.

The amount of estimated bad debts that is included in accounts receivable. This amount is subtracted from accounts receivable on the balance sheet.

Amortization is used in two ways. The term refers to the paying off of a debt with regular payments (as in "amortizing" a mortgage) and it also refers to the accounting procedure that gradually reduces the cost value of an intangible asset, that is, depreciation.

A report prepared yearly by publicly held corporations, that must be distributed (by law) to shareholders. The report contains the company's financial statements (income statement, balance sheet, and others), notes to financial statements, and other material of interest to investors and other outside parties.

To increase in value.

An item of value owned or controlled by the entity, which was acquired at a measurable cost. Note that in CaseView, "Asset" means "Capital Asset:"

Capital Asset: A long-lived asset, usually a tangible asset. These items go on the company's balance sheet (they are "capitalized"), are usually paid for out of a capital budget, and are approved for purchase through a capital review process. In order to qualify as a capital asset, the item may have to cost more than a specified amount, and it may need to have a useful life of more than one year.

For accounting purposes, other important asset categories include

Current assets: Cash and other assets that are expected to be (or could be) converted into cash or used up in the near future, usually within a year. Accounts receivables and finished goods inventory, for instance, are often classified as current assets. Contrast with fixed assets.

Fixed assets: Tangible property owned by the corporation or entity, that is not used up, consumed, or converted into cash during normal business operations. Factory machinery, buildings, and large computer systems are typical fixed assets. Contrast with current assets.

Intangible assets: An asset that has no physical substance, such as goodwill, trademarks, patents, or the protection provided by an insurance policy. Even though they have no physical substance, intangible assets can and often do appear on the balance sheet. Contrast with tangible asset

Tangible assets: An asset that has physical substance, such as land, buildings, computing equipment, or cash (and often, accounts receivable, even though it could be argued that they do not have physical existence. Contrast with intangible asset.

Wasting assets: assets including natural resources, such as oil, which are consumed or used up in the course of business.

Professional inspection of accounting records and data, to render an opinion about a company's (or other entity's) financial statements, regarding their fairness, accuracy, and conformity with generally accepted accounting principles.

(Also called accountant's opinion, or auditor's statement). The statement signed by an external auditor, expressing an opinion as to the fairness of financial statements and their conformity to generally accepted accounting principles.

An account receivable that never will be collected. See allowance for doubtful accounts.

The estimated amount of bad debts applicable to an accounting period.

A financial statement that reports the assets, liabilities, and owner's equities of a company at one point in time, usually the end of the company's fiscal year or quarter (as contrasted with the income statement which reports the company's earnings over a period of time). The balance sheet's 3 main parts are given by the accounting equation:

Assets = Liabilities + Owner's Equity

Assets are usually listed on the left (or top), while liabilities and owner’s equities appear at the right (or bottom). The term "balance" means that a company's assets must equal (balance) the sum of its liabilities and owner’s equities.

A written promise to pay interest and to repay money furnished to the entity at some future date, usually several years after the date of the issue. Companies issue bonds in order to raise money. Doing so incurs long a long term liability (debt).

See accumulated depreciation.

A colloquial term for net income, usually the bottom line of an income statement.

The volume of sales required so that total revenues and total costs are equal. May be expressed in product units or in revenue terms.

 A business case is a tool that supports planning and decision making–including decisions about whether to buy, which vendor to choose, and when to implement. Business cases are generally designed to answer the question: What will be the financial consequences if we choose X or do Y? A good business case shows expected cash flow consequences of the decision, over time, and it includes the rationale for quantifying benefits and costs. Critical success factors and significant risks will be discussed, if relevant. The case also describes the overall impact of your proposal in terms that every financially astute manager looks for: net cash flow, discounted cash flow, payback period, and internal rate of return.

The organizing backbone of the case is a time line extending across months or years, as the figure suggests. This gives you a framework for showing management how they can work with you to implement financial tactics: reduce costs, increase gains, accelerate gains.

The business case is not a budget, not a management accounting report, and not a financial reporting statement. This distinction is important for deciding which kind of cost and benefit data go into the business case: incremental values or total cost and benefit figures. Incremental values are probably the right choice in decision support situations, especially where both costs and benefits will enter the case.

A good business case in a complex environment requires assumptions, arbitrary judgments, and the development of new data–new information that goes beyond existing budgets and business plans. This means that two people working independently can evaluate the same proposed scenario, use correct financial arithmetic and still produce quite different business case results.