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Debt a company must pay off within the year; that is, they are a current liability. Typically, these debts are to the company’s suppliers. The accounts payable amount is subtracted from the sales or revenue amount on a balance sheet when net income and net worth are calculated.
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Assets are things you own, such as cash, real estate, stocks, and bonds. In the case of a business, assets also include inventory. On a balance sheet, assets contribute to the positive side, and liabilities contribute to the negative side. For example, if you own a $100,000 house with a $60,000 mortgage, you would have $40,000 of the houses equity on the assets side of your balance sheet, because you own that portion of the house; the $60,000 would appear on the liabilities side of your balance sheet because you owe that amount to your mortgage lender.
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The total asset value of a company minus intangible assets and total liabilities. Intangible assets include such things as good will and patents.
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Difference between the actual fixed overhead costs and the budgeted fixed overhead costs incurred during the period.
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The payment of money by a business to purchase or improve assets such as buildings or machinery.
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Improving the sales of existing products and services to new customers.
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Improving the process of selling more products to existing customers.
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The relative proportion of each type of cost within an organization. This can also refer to the breakdown of costs required to manufacture a product.
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A company’s current assets (typically cash + receivables + inventory) divided by its current liabilities (debt due within a year). This ratio gives you a sense of a company’s ability to meet all short-term liabilities with liquid assets, should it need to. A ratio of 1 implies adequate current assets to cover current liabilities, and the higher above 1, the better. This ratio is an adequate measure of financial strength in the short term, and can be used on a comparative basis among companies. You must, however, be careful not to make implicit assumptions about a company’s earnings or cash flow sustainability simply from the current ratio.
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Revenue that is considered a liability until work is rendered. An example of this is where there is upfront payment for work that has not been rendered yet. The payment is applied to the cash account, but at the same time there is a liability for the work that has not yet been rendered. The work then gets rendered against the liability.
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Businesses functions conducted day-to-day business over the Internet and/or other electronic networks such as electronic data interchange (EDI). Electronic business includes collaborating with distributors on sales promotions, interacting with and servicing the customers, and conducting joint research with business partners.
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Business conducted through the use of computers, telephones, fax machines, barcode readers, credit cards, automated teller machines (ATM) or other electronic appliances (whether or not using the internet) without the exchange of paper-based documents. It includes activities such as procurement, order entry, transaction processing, payment, authentication and non-repudiation, inventory control, order fulfillment, and customer support. When a buyer pays with a bank card swiped through a magnetic-stripe-reader, he or she is participating in e-commerce.
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Best determined through the inverse relationship between the amount of time elapsed between revenue recognition and cash collection.
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Ownership. When you own part of something, you have equity in it.
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The amount at which an asset could be bought or sold in a current transaction between willing parties, other than in liquidation. On the other side of the balance sheet, the fair value of a liability is the amount at which that liability could be incurred or settled in a current transaction between willing parties, other than in liquidation.
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A very useful tool for comparing actual costs experienced to the cost allowable for the activity level achieved, i.e. it is dynamic in nature as compared to static. A series of budgets can be readily developed to fit any activity level. Flexible budgeting distinguishes between fixed and variable cost, thereby allowing for a budget that can be automatically adjusted to the level of activity actually attained.
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An alternative term for distribution channel. Path or 'pipeline' through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the vendor). A distribution channel can be as short as being direct from the vendor to the consumer or may include several inter-connected (usually independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer.
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Accounting software that can be an extremely valuable asset to a company’s accounting processes and by extension it’s bottom line.
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A probability-based selection protocol in which each unit has a known probability of being selected. The chances of selection need not be equal for each unit, as long as the chances are known for each unit.
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An account used to record cash and credit sales transactions resulting from the sale of goods or services.
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