Expenses are recognized when incurred rather than when paid.Īn expense that has occurred but is not recognized in the accounts.

Method of ACCOUNTING that recognizes REVENUE when earned, rather than when collected. The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business, using all the techniques developed by accountants to apply the MATCHING PRINCIPLE. The recognition of an expense or revenue that has occurred but has not yet been recorded. Found by dividing net sales by average net ACCOUNT RECEIVABLE. Used to measure a company’s ability to collect cash from credit customers. The APB was replaced by the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB).Ī financial record of an individual ACCOUNT PAYABLE in which entries can be made daily. Senior technical committee of the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA) which issued pronouncements on accounting principles from 1959-1973.

The sequence of steps followed in the accounting process to measure business transactions and transform the measurements into FINANCIAL STATEMENTS for a specific period. Recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the FINANCIAL STATEMENTS.Ĭhange in (1) an accounting principle (2) an accounting estimate or (3) the reporting entity that necessitates DISCLOSURE and explanation in published financial reports. An accountants' report does not result from the performance of an AUDIT.

Person skilled in the recording and reporting of financial transactions.įormal document that communicates an independent accountant's: (1) expression of limited assurance on FINANCIAL STATEMENTS as a result of performing inquiry and analytic procedures ( REVIEW REPORT) (2) results of procedures performed (AGREED-UPON PROCEDURES REPORT) (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management ( COMPILATION REPORT) or (4) an opinion on an assertion made by management in accordance with the Statements on Standards for Attestation Engagements (ATTESTATION REPORT). Method that records greater DEPRECIATION than STRAIGHT-LINE DEPRECIATION in the early years and less depreciation than straight-line in the later years of an ASSET'S HOLDING PERIOD.įormal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.Īmount owed to a CREDITOR for delivered goods or completed services.Ĭlaim against a DEBTOR for an uncollected amount, generally from a completed transaction of sales or services rendered.Īny reimbursement or other expense allowance arrangement of an employer that meets all of the following requirements (therefore excluding it from gross w-2 EARNED INCOME and tax): (1) it provides reimbursements advances or allowances including per diem and meals, to employees for any job related deductible business expense (2) employees must be able to substantiate expenses covered in the plan (3) employee must return any excess advances or payments. If a reasonable person could not reach such a conclusion regarding a particular misstatement, that misstatement is more than inconsequential.Ĭomplete removal of an amount due, (usually referring to a tax ABATEMENT a penalty abatement or an INTEREST abatement within a governing agency).Īn approach to product costing that assigns a representative portion of all types of manufacturing costs-direct materials, direct labor, variable factory overhead, and fixed factory overhead-to individual products. If a reasonable person would conclude after considering the possibility of further undetected misstatements that the misstatement either individually or when aggregated with other misstatements would clearly be immaterial to the FINANCIAL STATEMENTS.

Accounting definition