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Term Definition Total of the money owed by the company to suppliers or vendors. Money due to the company from customers that have not been paid. Expenses that have been incurred but are not due to be paid.
Revenue that has been earned but is not yet due to be paid. (Typically this is because it has not been invoiced.)
Example: You are working on a six-month project and the bill will not be sent until the project is complete. In the accrual accounting system, you will need to create an adjusting entry for each of the first five months to show earnings.
A journal entry that moves the difference between revenue and expenses from the income statement to the owner’s equity. Total price paid for the products being sold by the business, including shipping costs. The decrease in value of a fixed asset over its life. This expense is spread out over its future life. It is considered a source of cash because it can reduce your tax bill. What the shareholders or company owner has left after all liabilities have been paid. Profit before expenses, interest, taxes, and other charges have been deducted. The sum of finished products, work in progress, and raw materials on hand. The company’s debts. Profit after expenses, interest, taxes, and other charges have been deducted. An asset that you have paid for but not used. For example, businesses often pay insurance up-front at the beginning of the year. The expense is incurred all at once and then the asset is redeemed over the course of the year. The profits of a business that are not paid to shareholders or the owner. They are retained by the business, reinvested in the company, and therefore accumulate.