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Deferral
A deferral, in ''accrual accounting'', is any account where the income or expense is not recognised until a future date (accounting period), e.g. annuities, charges, taxes, income, etc. The deferred item may be carried, dependent on type of deferral, as either an asset or liability. See also accrual. Deferrals are the consequence of the revenue recognition principle which dictates that revenues be recognized in the period in which they occur, and the matching principle which dictates expenses to be recognized in the period in which they are incurred. Deferrals are the result of cash flows occurring before they are allowed to be recognized under accrual accounting. As a result, adjusting entries are required to reconcile a flow of cash (or rarely other non-cash items) with events that have not occurred yet as either liabilities or assets. Because of the similarity between deferrals and their corresponding accruals, they are commonly conflated. * Deferred expense: cash has ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Deferred Income
Deferred income (also known as deferred revenue, unearned revenue, or unearned income) is, in accrual accounting, money received for goods or services which has not yet been earned. According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted into revenue. For example, a company receives an annual software license fee paid out by a customer upfront on January 1. However, the company's fiscal year ends on May 31. So, the company using accrual accounting adds only five months' worth (5/12) of the fee to its revenues in profit and loss for the fiscal year the fee was received. The rest is added to ''deferred income'' (liability) on the balance sheet for that year. A typical example is an annual maintenance contract where the entire contract is invoiced up front. “I received $12,000 for an annual maintenance contract, but need to recognize it as deferred income, and then recognize $1,000 each month as the service ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accrual
Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...s over a period of time. Accruals in accounting For example, a company delivers a product to a customer who will pay for it 30 days later in the next fiscal year, which starts a week after the delivery. The company recognizes the proceeds as a revenue in its current income statement still for the fiscal year of the delivery, even though it will not get paid until the following accounting period. The proceeds are also an accrued income (asset) on the balance sheet for the delivery fiscal year, but not for the next fiscal year when cash is received. Similarly, the salesperson who sold the product earned a commission at the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accrued Revenue
Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investments over a period of time. Accruals in accounting For example, a company delivers a product to a customer who will pay for it 30 days later in the next fiscal year, which starts a week after the delivery. The company recognizes the proceeds as a revenue in its current income statement still for the fiscal year of the delivery, even though it will not get paid until the following accounting period. The proceeds are also an accrued income (asset) on the balance sheet for the delivery fiscal year, but not for the next fiscal year when cash is received. Similarly, the salesperson who sold the product earned a commission at the moment of sale (or delivery). The company will recognize the commission as an expense in its current income statement, even though the salesperson will actually get paid at the end of the following week in the next accounting period. The commission is ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Matching Principle
In accrual accounting, the matching principle instructs that an expense should be reported in the same period in which the corresponding revenue is earned, and is associated with accrual accounting and the revenue recognition principle states that revenues should be recorded during the period in which they are earned, regardless of when the transfer of cash occurs. By recognizing costs in the period they are incurred, a business can see how much money was spent to generate revenue, reducing "noise" from timing mismatch between when costs are incurred and when revenue is realized. Conversely, cash basis accounting calls for the recognition of an expense when the cash is paid, regardless of when the expense was actually incurred.Accounting Principles by Wild, Shaw, Chiappetta If no cause-and-effect relationship exists (''e.g.,'' a sale is impossible), costs are recognized as expenses in the accounting period they expired: ''i.e.,'' when have been used up or consumed (''e.g.,'' of s ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accrual Accounting
Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investments over a period of time. Accruals in accounting For example, a company delivers a product to a customer who will pay for it 30 days later in the next fiscal year, which starts a week after the delivery. The company recognizes the proceeds as a revenue in its current income statement still for the fiscal year of the delivery, even though it will not get paid until the following accounting period. The proceeds are also an accrued income (asset) on the balance sheet for the delivery fiscal year, but not for the next fiscal year when cash is received. Similarly, the salesperson who sold the product earned a commission at the moment of sale (or delivery). The company will recognize the commission as an expense in its current income statement, even though the salesperson will actually get paid at the end of the following week in the next accounting period. The commission is ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annuity (finance Theory)
In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. Annuities may be calculated by mathematical functions known as "annuity functions". An annuity which provides for payments for the remainder of a person's lifetime is a life annuity. Types Annuities may be classified in several ways. Timing of payments Payments of an ''annuity-immediate'' are made at the end of payment periods, so that interest accrues between the issue of the annuity and the first payment. Payments of an ''annuity-due'' are made at the beginning of payment period ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Software License
A software license is a legal instrument (usually by way of contract law, with or without printed material) governing the use or redistribution of software. Under United States copyright law, all software is copyright protected, in both source code and object code forms, unless that software was developed by the United States Government, in which case it cannot be copyrighted. Authors of copyrighted software can donate their software to the public domain, in which case it is also not covered by copyright and, as a result, cannot be licensed. A typical software license grants the licensee, typically an end-user, permission to use one or more copies of software in ways where such a use would otherwise potentially constitute copyright infringement of the software owner's exclusive rights under copyright. Software licenses and copyright law Most distributed software can be categorized according to its license type (see table). Two common categories for software under copyri ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Liability (accounting)
In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is ''obliged'' to make to other entities as a result of past transactions or other ''past'' events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Characteristics A liability is defined by the following characteristics: * Any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time; * A duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services, or other transaction yielding an economic benefit, at a specified or determinable date, on occurrence of a specified event, or on demand; * A duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement; and, * A transaction or event obligating the entity t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Amortization (accounting)
In accounting, amortization refers to expensing the acquisition cost minus the residual value of intangible assets in a systematic manner over their estimated "useful economic lives" so as to reflect their consumption, expiry, and obsolescence, or other decline in value as a result of use or the passage of time. The term amortization can also refer to the completion of that process, as in "the amortization of the tower was expected in 1734". Depreciation is a corresponding concept for tangible assets. Methodologies for allocating amortization to each accounting period are generally the same as these for depreciation. However, many intangible assets such as goodwill or certain brands may be deemed to have an indefinite useful life and are therefore not subject to amortization (although goodwill is subjected to an impairment test every year). While theoretically amortization is used to account for the decreasing value of an intangible asset over its useful life, in practice man ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Balance Sheets
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business's calendar year. A standard company balance sheet has two sides: assets on the left, and financing on the right–which itself has two parts; liabilities and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Income Statement
An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''statement of financial performance'', ''earnings statement'', ''statement of earnings'', ''operating statement'', or ''statement of operations'') is one of the financial statements of a company and shows the company's revenues and expenses during a particular period. It indicates how the revenues (also known as the ''“top line”'') are transformed into the net income or net profit (the result after all revenues and expenses have been accounted for). The purpose of the income statement is to show managers and investors whether the company made money (profit) or lost money (loss) during the period being reported. An income statement represents a period of time (as does the cash flow statement). This contrasts with the balance sheet, which ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Expense
An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture, or an automobile is often referred to as an expense. An expense is a cost that is "paid" or " remitted", usually in exchange for something of value. Something that seems to cost a great deal is "expensive". Something that seems to cost little is "inexpensive". "Expenses of the table" are expenses for dining, refreshments, a feast, etc. In accounting, ''expense'' is any specific outflow of cash or other valuable assets from a person or company to another person or company. This outflow is generally one side of a trade for products or services that have equal or better current or future value to the buyer than to the seller. Technically, an expense is an event in which a proprietary stake i ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
