Accounting

10-K The 10-K is the annual report filed by public companies with the SEC. It contains audited financial statements, MD&A, risk factors, and detailed disclosures.

10-Q Quarterly SEC filing that provides condensed, unaudited financial statements and management discussion between annual 10-K reports.

Absorption Costing Method of cost accounting that allocates all production costs (variable and fixed) to units manufactured.

Accounting Estimate A management judgment or forecast embedded in financial statements—such as depreciation rates, bad-debt provisions, or lease terms—that auditors must evaluate for reasonableness.

Accounting for Customer Returns and Refunds How to record refund liabilities and recovery rights at the time of sale under ASC 606, with worked examples.

Accounting for Government Grants How companies recognise subsidies, tax credits, and non-repayable grants under IAS 20 versus US GAAP analogies.

Accounts payable Accounts payable is a liability representing amounts the company owes to suppliers for goods or services received. It arises under accrual accounting when purchases are made on credit.

Accounts Payable vs Accrued Liabilities Accounts payable vs accrued liabilities: understand the balance-sheet distinction between invoiced vendor payables and unbilled expense obligations.

Accounts receivable Accounts receivable is an asset on the balance sheet representing money customers owe the company. It appears when revenue is recognized before cash is collected.

Accounts Receivable Aging Schedule Accounts receivable aging schedule explained: breaks down customer balances by payment timeliness to estimate uncollectible amounts.

Accounts Receivable Turnover Ratio Explained The accounts receivable turnover ratio measures how efficiently a company collects payments from customers. Formula, calculation from financial statements, and interpretation.

Accrual accounting Accrual accounting recognizes revenue when earned and expenses when incurred, regardless of cash timing. It is the standard for financial reporting.

Accrual vs Cash Basis Accounting Learn the fundamental difference between accrual and cash basis accounting—when revenue and expenses are recorded, and which method businesses must use.

Accrual vs Cash Basis Financial Statements How accrual-basis and cash-basis financial statements differ in recognizing revenue and expenses, with examples of timing differences and their impact on profitability.

Accrued Interest Receivable on the Balance Sheet Accrued interest receivable balance sheet shows interest earned but unpaid on notes and bonds. A current asset under accrual accounting.

Accrued Liabilities Expenses incurred by a company but not yet invoiced or paid, recorded as current liabilities on the balance sheet under accrual accounting.

Accrued Liabilities vs Accounts Payable Accrued liabilities vs accounts payable: the balance sheet distinction between invoiced obligations and estimated expenses incurred but unbilled.

Accumulated depreciation Accumulated depreciation is the total depreciation expense recorded against an asset since its acquisition. It appears on the balance sheet as a contra-asset that reduces the asset's book value.

Accumulated Depreciation on the Balance Sheet How accumulated depreciation is presented as a contra-asset on balance sheets, reducing gross PP&E to net book value and signaling asset age.

Accumulated Other Comprehensive Income An equity account on the balance sheet that holds unrealized gains and losses on certain assets, bypassing the income statement until realized.

Activity Based Costing Assigning overhead and indirect costs to products based on the activities that drive them, rather than volume.

Additional Paid-In Capital Explained What additional paid-in capital is, how it arises from stock issuances, and how it differs from par value on the balance sheet.

Adjusting Entries Period-end journal entries that realign accrual accounting records with economic reality before financial statements are finalized.

Adverse Audit Opinion The strongest negative audit finding: a statement that financial statements are materially and pervasively misstated.

Agreed-Upon Procedures Engagement A limited assurance engagement in which auditors test only the specific items the client requests and report findings without forming an overall opinion.

Allocating Transaction Price Across Multiple Performance Obligations How ASC 606 requires sellers to split a bundled contract price among distinct deliverables using relative standalone selling prices.

Allocation Base The metric used to distribute indirect costs across cost objects, such as products or departments, in activity-based or traditional costing.

Allowance for doubtful accounts The allowance for doubtful accounts is a contra-asset that reduces accounts receivable on the balance sheet to reflect amounts expected not to be collected.

Amortization Amortization is the allocation of the cost of an intangible asset across its useful life. It is the equivalent of depreciation but applied to non-physical assets like patents, trademarks, and software.

Analytical Procedures in Auditing Auditors use ratio analysis and trend comparisons to assess risk and test account balances; analytical procedures in auditing range from scanning to statistical modeling.

ASC 606 ASC 606 is the GAAP standard that governs revenue recognition. It establishes a five-step process for recognizing revenue when customers obtain control of promised goods or services.

ASC 606 Five-Step Revenue Recognition Model The five steps in ASC 606 revenue recognition with plain-language examples of how to apply each step correctly.

ASC 842 Lease Standard The US accounting rule (effective 2019) that requires companies to record most operating leases as assets and liabilities on the balance sheet.

Asset Impairment Asset impairment is a write-down of an asset's carrying amount when its market value or recoverable value falls below its book value on the balance sheet.

Asset Retirement Obligation A legal duty to dismantle or restore a long-lived asset, recognized as a liability at fair value upon acquisition.

Asset Retirement Obligation Accounting Asset retirement obligation accounting records the legal duty to dismantle, remove, or restore long-lived assets, measured at fair value and accreted through operational life.

Assurance Warranty vs. Service Warranty in Revenue Recognition Assurance warranty vs service warranty revenue recognition: assurance warranties are product liabilities expensed as provisions; service warranties are distinct performance obligations that defer revenue.

Audit opinion The audit opinion is the auditor's formal statement on whether financial statements are fairly presented in accordance with GAAP. It can be unqualified, qualified, adverse, or disclaim opinion.

Audit Risk Model A framework showing how auditors decompose overall risk into inherent, control, and detection components to guide testing.

Audit Sampling Methods Explained Audit sampling methods explained: statistical and non-statistical approaches auditors use to test transactions and draw conclusions about large populations.

Audit Trail in Double-Entry Accounting Audit trail in double-entry accounting: how transaction records and linked debits/credits support financial statement verification and internal controls.

Auditing Related-Party Transactions: Risks and Required Procedures Why auditing related party transactions requires heightened skepticism, the specific AICPA and IASB standards, and the tests auditors must perform to detect fraud and misstatement.

Auditor Independence The rules and threats that determine when an auditor cannot serve a client due to conflicts of interest or compromised objectivity.

Auditor Rotation Mandatory rules requiring audit firms or partners to be replaced after a set tenure, designed to reduce familiarity bias and maintain audit independence.

Available-for-Sale Securities Debt and equity securities held neither for active trading nor to maturity, carried at fair value through other comprehensive income.

Balance sheet The balance sheet is a snapshot of a company's assets, liabilities, and equity at a specific point in time. It answers the question: what is the company worth, and who owns it?

Bank Reconciliation: Steps and Common Adjustments Bank reconciliation steps: a systematic process to align cash-book balance with bank statement, accounting for timing differences, checks in transit, and bank errors.

Bargain Purchase Gain in Business Combinations Bargain purchase gain accounting covers the rare case where acquisition cost falls below fair value of net assets acquired, with the resulting gain recognized in income.

Bill-and-Hold Arrangement Revenue recognized before physical delivery when the buyer directs the seller to hold inventory at the seller's location.

Bill-and-Hold Criteria Under ASC 606 The four specific conditions a bill-and-hold arrangement must meet to recognize revenue before physical delivery under ASC 606.

Bill-and-Hold Revenue Recognition Bill-and-hold revenue recognition allows a seller to recognize revenue before shipment if strict criteria are met, including customer acceptance and contractual certainty.

Biological Assets Living organisms—crops, livestock, orchards—measured at fair value under IFRS, with unrealised gains flowing through profit rather than equity.

Bond Discount Amortization on the Balance Sheet Bond discount amortization is the systematic increase in a bond's carrying value from issuance to maturity. Understand the accounting, balance sheet presentation, and income statement impact.

Bond Premium Amortization on the Balance Sheet How bond premium amortization works on the balance sheet when a bond is issued above par, reducing the liability's carrying value each period.

Book Value vs Market Value on the Balance Sheet Book value vs market value balance sheet: why historical-cost assets diverge from current market values, and what the gap reveals about company worth.

Business Combination (Purchase Method) Recording a merger as an asset purchase with fair value allocation, the standard approach in modern acquisitions.

Byproduct Costing How to account for incidental outputs of a joint manufacturing process, using either net realizable value or production methods.

Byproduct vs Scrap: Accounting Treatment Compared Byproducts and scrap are handled differently in accounting based on relative sales value. Learn the two recognition methods and when each applies.

Capitalization vs Expensing Understand capitalization vs expensing of costs and how the choice affects earnings, asset values, and tax liability.

Capitalized Software Costs Internal-use software development expenditures recorded as an asset and amortized rather than expensed immediately.