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Convention Of Conservatism
In accounting, the convention of conservatism, also known as the doctrine of prudence, is a policy of anticipating possible future losses but not future gains. It states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected. This policy tends to understate net assets and net income, and therefore lead companies to "play safe". When given a choice between several outcomes where the probabilities of occurrence are equally likely, one should recognize that transaction resulting in the lower amount of profit, or at least the deferral of a profit. Conservatism plays an important role in a number of accounting rules, including the allowance for doubtful debts and the lower of cost or market rule, which states that one should record inventory at the lower of either its acquisition cost or its current market value. See also *Generally Accepted Accounting Principles Publicly traded companies typically are subj ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accounting
Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and Regulatory agency, regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used interchangeably. Accounting can be divided into several fields including financial accounting, management accounting, tax accounting and cost accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators and suppliers. Management accounting focuses on the measurement, analysis and reporting of information for internal use by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Asset
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetaryThere are different methods of assessing the monetary value of the assets recorded on the Balance Sheet. In some cases, the ''Historical Cost'' is used; such that the value of the asset when it was bought in the past is used as the monetary value. In other instances, the present fair market value of the asset is used to determine the value shown on the balance sheet. value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business. ''Total assets'' can also be called the ''balance sheet total''. Assets can be grouped into two major classes: Tangible property, tangib ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Income
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For example, a person's income in an economic sense may be different from their income as defined by law. An extremely important definition of income is Haig–Simons income, which defines income as ''Consumption + Change in net worth'' and is widely used in economics. For households and individuals in the United States, income is defined by tax law as a sum that includes any wage, salary, profit, interest payment, rent, or other form of earnings received in a calendar year.Case, K. & Fair, R. (2007). ''Principles of Economics''. Upper Saddle River, NJ: Pearson Education. p. 54. Discretionary income is often defined as gross income minus taxes and other deductions (such as mandatory pension contributions), and is widely used as a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Net Asset
Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end, mutual funds, hedge funds, and venture capital funds. Shares of such funds registered with the U.S. Securities and Exchange Commission are usually bought and redeemed at their net asset value. It is also a key figure with regard to hedge funds and venture capital funds when calculating the value of the underlying investments in these funds by investors. This may also be the same as the book value or the equity value of a business. Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding held by investors, thereby representing the net asset value ''per share''. Overview Net asset value and other accounting and recordkeeping activities are the result of the process of fund accounting (also known as securities accounting, investment accounting, and portfolio accounting). Fund accounting systems are ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Net Income
In business and Accountancy, accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and Amortization (accounting), amortization, interest, and taxes, and other expenses for an accounting period. It is computed as the residual of all revenues and gains less all expenses and losses for the period,Weil, Schipper, Francis. (2009) Financial Accounting: An Introduction to Concepts, Methods, and Uses. Cengage Learning and has also been defined as the net increase in Equity (finance), shareholders' equity that results from a company's operations.Weil, Schipper, Francis. (2010) Financial Accounting. Cengage Learning. It is different from gross income, which only deducts the cost of goods sold from revenue. For Household, households and individuals, net income refers to the (gross) income minus taxes and other deductions (e.g. mandatory pension cont ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Profit (accounting)
Profit, in accounting, is an income distributed to the ownership , owner in a Profit (economics) , profitable market production process (business). Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use. Income formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the Stakeholder (corporate), stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economics , economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context. Other terms See also * Gross income * Net profit * Profitability index * Rate ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Deferral
In accounting, a deferral is any account where the income or expense is not recognised until a future date. In accounting, deferral refers to the recognition of revenue or expenses at a later time than when the cash transaction occurs. This concept is used to align the reporting of financial transactions with the periods in which they are earned or incurred, according to the matching principle and revenue recognition principle. Deferrals are recorded as either assets or liabilities on the balance sheet until they are recognized in the appropriate accounting period. Two common types of deferrals are deferred expenses and deferred income. A deferred expense represents cash paid in advance for goods or services that will be consumed in future periods. On the other hand, deferred income (or deferred revenue) is a liability that arises when payment is received for goods or services that have yet to be delivered or fulfilled. Deferred charge A deferred charge is a cost recorded ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Doubtful Debt
In finance, bad debt, occasionally called uncollectible accounts expense, is a monetary amount owed to a creditor that is unlikely to be paid and for which the creditor is not willing to take action to collect for various reasons, often due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency. A high bad debt rate is caused when a business is not effective in managing its credit and collections process. If the credit check of a new customer is not thorough or the collections team is not proactively reaching out to recover payments, a company faces the risk of a high bad debt. Various technical definitions exist of what constitutes a bad debt, depending on accounting conventions, regulatory treatment and institution provisioning. In the United States, bank loans with more than ninety days' arrears become "problem loans". Accounting sources advise that the full amount of a bad debt be written off to the profit and loss account ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Lower Of Cost Or Market
In accounting, lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory. Normally, ending inventory is stated at historical cost. However, there are times when the original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value. If the inventory has decreased in value below historical cost, then its carrying value is reduced and reported on the balance sheet. The criterion for reporting this is the current market value. Any loss resulting from the decline in the value of inventory is charged to "cost of goods sold" (COGS) if non-material, or "loss on the reduction of inventory to LCM" if material. History The lower of cost or market concept first became part of normal accounting practices in England during the nineteenth century. Lower of cost or market was considered fair because assets were valued on a going-concern basis, rather than the price at which the assets were purch ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Market Value
Market value or OMV (open market valuation) is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with ''open market value'', ''fair value'' or '' fair market value'', although these terms have distinct definitions in different standards, and differ in some circumstances. Definition International Valuation Standards defines market value as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion". Market value is a concept distinct from market price, which is "the price at which one can transact", while market value is "the true underlying value" according to theoretical standards. The concept is most commonly invoked in inefficient markets or disequilibrium situations where prevailing market prices a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Generally Accepted Accounting Principles
Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straightforward. Larger firms most often operate on an accrual basis. Accrual basis is one of the fundamental accounting assumptions, and if it is followed by the company while preparing the financial statements, then no further disclosure is required. Accounting standards prescribe in considerable detail what accruals must be made, how the financial statements are to be presented, and what additional disclosures are required. The term ''generally accepted accounting principles'' (GAAP) was popularized in the late 1930s. Some important elements that accounting standards cover include identifying the exact entity which is reporting, discussing any "going concern" questions, specif ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Generally Accepted Accounting Principles (USA)
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC), and is the default accounting standard used by companies based in the United States. The Financial Accounting Standards Board (FASB) publishes and maintains the Accounting Standards Codification (ASC), which is the single source of authoritative nongovernmental U.S. GAAP. The FASB published U.S. GAAP in Extensible Business Reporting Language (XBRL) beginning in 2008. Sources The FASB Accounting Standards Codification is the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. In addition to the SEC's rules and interpretive releases, the SEC staff issues Staff Accounting Bulletins that represent practices followed by the staff in administering SEC disclosure re ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
