Glossary of Charter Accounts

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ESP Educational Class
Mrs.ET Sopheak
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Glossary of Charter Accounts

• Accounts payable: Amounts owed to suppliers for purchases made on credit (on account). 
• Accounts receivable Amounts owed by customers who purchased products or services on credit (on account).
• Bank indebtedness: A short-term loan up to a maximum amount prearranged with a bank to cover cash shortfalls.
• Comparability An enhancing qualitative characteristic of useful information that enables users to identify and understand similarities in, and differences among, items
• Conceptual framework: A coherent system of interrelated elements that guides decisions about what to present in financial statements, alternative ways of reporting economic events, and appropriate ways of communicating this information.
• Contra- asset account: An account that is off set against (reduces) an asset account on the statement of financial position.
• Cost basis of accounting: A basis of measurement that states that assets and liabilities should be recorded and reported at their cost at the time of acquisition, as well as during the time the asset is held.
• Cost constraint: The constraint that the costs of obtaining and providing information should not be higher than the benefits that are gained by providing it.
• Current assets: Cash and other resources that it is reasonable to expect will be converted into cash, or will be sold or used up within one year of the company’s financial statement date or its operating cycle, whichever is longer.
• Current liabilities: Obligations that will be paid or settled within one year of the company’s financial statement date or its operating cycle, whichever is longer.
• Current maturities of long-term debt: The portion of a non-current or long-term loan that is repayable in the current year.
• Current ratio: A measure of liquidity used to evaluate a company’s short-term debt-paying ability. It is calculated by dividing current assets by current liabilities.
• Debt to total assets ratio: A measure of solvency showing the percentage of total financing that is provided by lenders and other creditors. It is calculated by dividing total liabilities by total assets. 
• Earnings per share (EPS): A measure of profitability showing the profit earned by each common share. It is calculated by dividing profit available to common shareholders by the weighted average number of common shares.
• Elements of financial statements: A set of definitions of basic terms in accounting, such as assets, liabilities, equity, revenues, and expenses.
• Fair value basis of accounting: A basis of measurement that states that assets should be reported at their fair value (price to sell).
• Intangible assets: Assets of a long-lived nature that do not have physical substance but represent a privilege or a right granted to, or held by, a company.
• Liquidity ratios: Measures of a company’s short-term ability to pay its maturing obligations (usually current liabilities) and to meet unexpected needs for cash.
• Long-term investments (also known as investments): Investments in debt securities intended to be held for many years to earn interest, and (2) equity securities of other companies held to generate investment revenue or held for strategic reasons.
• Merchandise inventory (also known as inventory): Goods held for sale to customers.
• Non-current assets (also known as long-term assets): Assets that are not expected to be converted into cash, sold, or used up by the business within one year of the statement date or its operating cycle.
• Non-current liabilities (also known as long-term liabilities): Obligations that are not expected to be paid or settled within one year or the company’s operating cycle.
• Notes payable (also known as loans payable): Amounts owed to suppliers, banks, or others that are supported by a written promise to repay.
• Notes receivable (also known as loans receivable): Amounts owed by customers or others that are supported by a written promise to repay.
• Objective of financial reporting: The provision of information about a company’s financial position, performance, and changes in financial position that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the company.
• Operating cycle: Average period of time it takes for a business to pay cash to obtain products or services and then receive cash from customers for these products or services. Th is can be one year or longer, depending on the type of business.
• Prepaid expenses: Costs paid in advance of use (such as rent and insurance).
• Price-earnings (P-E) ratio: A profitability measure of the ratio of the market price of each common share to the earnings per share. It reflects investors’ beliefs about a company’s future profit potential.
• Profitability ratios: Measures of a company’s operating success for a specific period of time.
• Property, plant, and equipment: Tangible assets of a long-lived nature that are being used to operate the business.
• Relevance: A fundamental qualitative characteristic describing information that makes a difference in a decision. It should have predictive value, confirmatory value, or both, and be material.
• Solvency ratios: Measures of a company’s ability to survive over a long period of time by having enough assets to settle its liabilities as they fall due.
• Supplies Consumable items used in running a business, such as office and cleaning supplies.
• Timeliness: An enhancing qualitative characteristic of useful information that means that information is available to decision makers in time to be capable of influencing their decisions.
• Trading investments Investments in debt securities or equity securities of other companies that are bought with the intention of selling them aft er a short period of time in order to earn a profit from their price fluctuations.
• Understandability: An enhancing qualitative characteristic of useful information that means that information is clearly and concisely classified, characterized, and presented.
• Unearned revenue Cash received when a customer pays in advance of being provided with a service or product.
• Verifiability: An enhancing qualitative characteristic of useful information that means that different knowledgeable and independent users could reach consensus, although not necessarily complete agreement, that the information is a faithful representation.
• Working capital: A measure of liquidity used to evaluate a company’s short-term debt-paying ability. It is calculated by subtracting current liabilities from current assets.

Thanks,

Mrs.ET Sopheak

Lecturer in Economics