会计概念英文名词解释.docx

会计概念英文名词解释.docx

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会计概念英文名词解释

Session1DefinitionsandElementsofFinancialStatements

Youwillneedtolearntheseunderlinedtermsforthemidterm!

I.Incomestatement–“video”ofrevenues,expenses,gains,lossesoveraperiodoftime

a.Basicdefinitions:

Revenue–increaseinequity（andassociatedincreaseinassetsand/ordecreaseinliabilities）earnedfromthesaleofgoodsorprovisionofservicestocustomers;itismeasuredonagrossbasisastheamountofassetstobereceived.

Expense–decreaseinequity（andassociateddecreaseinassetsand/orincreaseinliabilities）createdbysaleofgoods,renderingofservicesorpassageoftime;itismeasuredonagrossbasisastheamountofassetsconsumed.

Gain–increaseinequityresultingfromsellingassetsorrecognizingtheincreaseinvalueofassets（ordecreaseinvalueofliabilities）;itismeasuredonanetbasisasthepositivedifferencebetweencurrentvalueandamountrecordedonthebalancesheet.

Loss–decreaseinequityresultingfromsellingassetsordecreaseinvalueofassets（orincreaseinvalueofliabilities）;itismeasuredonanetbasisasthenegativedifferencebetweencurrentvalueandamountrecordedonthebalancesheet.

Accountingperiod-thetimeperiodbetweenconsecutivebalancesheetsforwhichafirmpreparesanincomestatementandstatementofcashflows（e.g.,anannualreporthasa12-monthaccountingperiodandaquarterlystatementhasa3-monthaccountingperiod）.

b.Elements:

Sales-revenuefromsellinggoodsorprovidingservicestocustomers,whichisreportedasthetoplineontheincomestatement.

CostofGoodsSoldorCostofSaleslabor,material,andoverheadcostsdirectlyrelatedtoprovidinggoodsorservices.

GrossProfitisthedifferencebetweenSalesRevenueandCostofGoodsSold,whichrepresentstheprofitthatisavailabletocoveralloftheotherexpensesontheincomestatement.

OperatingExpensesareexpensesrelatedtotheordinaryoperatingactivitiesofthefirmofprovidinggoodsorservicestocustomersorgainsandlossesrelatedtooperatingassetslikePPE.

OperatingProfitorIncomeequalsgrossprofitminusoperatingexpenses.

OtherNonoperatingRevenueandExpenseareitemsrelatedtoFINANCINGactivities（i.e.,interestexpense）andINVESTINGactivities（i.e.,interestincomeandgainsandlossesoninvestments）.

IncomeBeforeTaxequalsoperatingprofitminusotherincomeandexpense.

TaxexpenseequalsaGAAPbasedmeasureofthegovernmentchargesonincome.

NetIncomeequalsincomebeforetaxminustaxexpense.

c.IncomestatementaccountsarecalledTEMPORARYACCOUNTSbecauseamountsaccumulateforadefinedperiodoftimeandarethenzeroedoutwhenthebalanceistransferredtoretainedearnings.Annualincomestatementamountsrepresentthetotalrevenuesorexpensesfora12monthperiodcalledthefiscalyear.

II.Balancesheet–“snapshot”ofassets,liabilities,stockholders’equityatapointintime

a.BasicDefinitions

Operatingcycle-averagetimeittakestogofromcashtogoodsandservicessoldtocustomersandthenbacktocashcollectedfromcustomers.

b.Elements:

Asset:

resourcethefirmcontrolsbecauseofapasttransactionoreventthatprovidesexpectedfuturebenefits.

Currentasset:

assetafirmexpectstoconverttocash,sell,orconsumewithinthelongerofoneyearoranoperatingcycle.

Noncurrentasset:

assetnotclassifiedascurrent.

Liability:

creditor’sclaimsorobligationthatrepresentsaprobablefutureeconomicsacrificeofassetsorservicesbasedonapasttransactionorevent.

Currentliability:

obligationafirmexpectstopaywithinthelongerofoneyearoranoperatingcycle.

Noncurrentliability:

liabilitynotclassifiedascurrent.

Shareholders’equity:

measureoffinancingprovidedbyownersofthefirmthatcapturesowners’residualclaimonassetsofthefirmaftersatisfyingliabilities.

Retainedearnings:

cumulativenetincomeminusdividendsoverthelifeofthefirm.

Retainedearningsareasourceoffinancing.Whenearningsexceedthedividendspaidouttoshareholders,itincreasesequityortheowner’sclaimonthefirm.

ThereisNOTacorresponding“cashfund”intheassetsectionequaltothebalanceinretainedearnings.Changesinretainedearningsareafunctionofnetincomeanddividendsdeclared,whichmayormaynotcorrespondtochangesincash.

Dividends:

distributionofcashtotheownersofthefirm.

c.BalancesheetaccountsarecalledPERMANENTACCOUNTSbecausetheamountsaccumulateyearafteryear.Theendingbalancefromthepreviousyearbecomesthebeginningbalanceforthenextyear.Forexample,endingcashamountin2011willbethebeginningcashamountin2014,thatisthenadjustedfor2014inflowsandoutflowstodeterminethe2014cashamount.

d.Basicaccountingequation:

ASSETS=LIABILITIES+STOCKHOLDERS'EQUITY

ThepowerfulimplicationisinvestmentsinassetscanbefinancedwitheitherDEBTorEQUITY!

Assetsareresourcesandliabilitiesandequityrepresenttheclaimsonthoseresources.

III.StatementofRetainedEarnings（includedinStatementofShareholders’Equity）presentsa“video”ofthechangeinretainedearningsfromnetincomeanddividendsduringtheperiod.

IV.StatementofCashFlows–“video”ofthesourcesandusesofcashoveraperiodoftimethatexplainsthechangeinthecashbalanceonthebalancesheet.

a.Operating–coreoperationsanditemsrelatedtomeasurementofnetincome

b.Investing-firmsINVESTinassetssoincludesassettransactions:

i.buyandsellpropertyplantandequipment

ii.buyandsellinvestments

c.Financing-firmsFINANCEwithdebtandequitysoincludesdebtandequitytransactions

i.borrowandpaybacknonoperatingdebt

ii.issueandrepurchasestock

iii.paydividends

d.Format

+NetOperatingCashFlow

+NetInvestingCashFlow

+NetFinancingCashFlow

=ChangeinCashforthePeriod

BeginningCashfromLastYear

+/-ChangeinCashforthePeriod

=EndingCashforThisYear

BalanceSheetAccountNameDefinitions

Anaccountaccumulatestheincreasesanddecreasesthatoccurforasingleitem.GAAPdoesnotprovideanall-inclusivelistofacceptableaccountnamessotheirusage

variesbyfirm.

Separateaccountsarereportediftheyare“material”orcrucialtounderstandingfirmperformance.Forexample,somefirmsdivideinterestrevenueandinterestexpenseintoseparateaccountswhileotherfirmscombinethemintoonenetaccount.

Youwillreceivecreditinexamsaslongasthenameispotentiallyusedinpracticeandaccuratelydescribesandcorrectlyclassifiesanaccountasasset,liability,orshareholders’equity.Itisacceptable,butnotrequired,tousemorespecificaccountnameslikeprepaidrentforprepaidexpense.

Thefollowinglistofaccountnamesarecommonlyused.

Assets:

Cash–currencyorbalancesincheckingaccounts,CDs,ormoneymarketaccountsavailabletomeetcurrentobligations.Highlyliquidshort-terminvestmentswithlessthan

90daystomaturityandlittleriskofvaluechangesarecalled"cashequivalents"and

includedinthecashaccount.

Short-terminvestmentormarketablesecurities–currentvalueofinvestmentsinanotherfirm’sdebtorequitysecuritiesthatcanbequicklysoldforcash.

Accountsreceivable–amountduefromcustomersforgoodsandservicesalreadydelivered.Grossaccountsreceivableistheamountowed.Net

accountsreceivableistheamountexpectedtobecollectedaftersubtractinganallowanceforuncollectibleaccounts.

Notesreceivable–amounttobereceivedfromanoutsideentityformalizedwithanoteorlendingagreementthatspecifiesinterestandpaymentterms.

Inventory–rawmaterials,workinprocess（productsstartedbutnotfinished）,andfinishedgoodsavailableforsaletocustomers.

Prepaidexpenses–assetrecognizedwhencashpaidinadvanceofwhenfutureexpenseswillbeincurred.

Long-terminvestments–investmentsinbondsorequitysecuritiesexpectedtobeheldforthelong-term.

Property,plant,andequipment（gross）–originalcosttoobtainandputintoservicebuildings,land,andequipment.

Accumulateddepreciation–acontraoroffsettingaccountwiththecumulativeamountofthecostofproperty,plantandequipmentassignedtodepreciationexpense.

Property,plantandequipment（net）–originalcostminusaccumulateddepreciation.

Intangibleassets–itemslikepatentsandcopyrightsthatprovidefuturebenefitbutdonothavephysicalsubstance.Intangibleassetsareonlyrecognizedwhentheyarepurchasedfromanoutsidesource.Forexample,ifafirmpurchasesapatentfromanothercompanythecostisshownasanasset.However,ifafirmdoesresearchthatresultsinapatent,thoseresearchcostsareincludedinR&Dexpenseandanassetisonlyrecognizedforthelegalandregistrationfeestoobtainthepatent.

Goodwill–purchasepriceofanacquiredcompanyminusthemarketvalueoftheidentifiableassetsminusliabilitiesofthatcompany.Themarketvaluesofbothtangibleandintangibleassetsareconsideredinthecalculationofidentifiableassets.GoodwillisONLYrecognizedwhenonecompanypurchasesanothercompanyatapremiumforthingslikefuturepotential,marketpower,andqualityofworkforcethatarenotconsidered“identifiableassets.”

Liabilities:

Accountspayable–amountowedtosuppliersforinventoryorothergoodsorservicespurchasedoncredit.

Otherpayablesoraccruedexpenses–amountsowedforexpensesthathavealreadybeenrecognizedlikeinterest,taxes,salaries,andrent.

Short-termloanspayableornotespayable–obligationsformalizedwithanoteorlendingagreementthatspecifyinterestandpaymenttermsandareduewithinthenextyear.

Current