How to Read and Interpret Financial Statements

 

Glossary

Accounting A system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers.

Accounts receivable Money owed to the company from customers as a result from credit sales.

Accounts payable Obligations that arise from the purchase of stock-in-trade items, supplies, or services on open account.

Accrual accounting The basis for recording transactions under Generally Accepted Accounting Principles (GAAP). That is, an expense is recorded when incurred regardless of when the cash payment for the expense is made. Revenues are recorded when a sale is made, not necessarily when cash flows occur.

Activity ratios Ratios that measure how efficiently ...