W04 vocab Flashcards
Account payable
Account for financial obligations to suppliers after purchasing products or services on credit
Current liability
Debt or obligation due within one year or, in rare cases, a company’s standard operating cycle, whichever is greater
Current portion of a note payable
Portion of a long-term note due during the company’s current operating period
Gross income (pay)
Amount earned by the employee before any reductions in pay occur due to involuntary and voluntary deductions
Interest
Monetary incentive to the lender, which justifies loan risk. Interest is paid to the lender by the borrower
Involuntary deduction
Withholding that neither the employer nor the employee have control over and is required by law to
Net income (pay)
(Also take home pay.) Remaining employee earnings balance after involuntary and voluntary deductions from employee pay
Note payable
Legal document between a borrower and a lender specifying terms of a financial arrangement. In most situations the debt is long-term
Principal
Initial borrowed amount of a loan, not including interest. Also, face value or maturity value of a bond (the amount to be paid at maturity)
Taxes payable
Liability created when a company collects taxes on behalf of employees and customers
Unearned revenue
Advance payment for a product or service that has yet to be provided by the company. The transaction is a liability until the product or service is provided
Voluntary deduction
Not required to be removed from employee pay unless the employee designates reduction of this amount
Amortization
Allocation of the costs of intangible assets over their useful economic lives. Also process of separating the principal and interest in loan payments over the life of a loan
Compound interest
In a loan when interest earned also earns interest
Debt financing
Borrowing money that will be repaid on a specific date in the future in order to finance business operations
Equity financing
Selling part of the business to obtain money to finance business operations
Fully amortized notes
Periodic loan payments that pay back the principal and interest over time with payments of equal amounts
Long-term liability
Debt settled outside one year or one operating cycle, whichever is longer
Note payable
Legal document between a borrower and a lender specifying terms of a financial arrangement. In most situations, the debt is long-term
Principal
Face value or maturity value of a bond (the amount to be paid at maturity); also, initial borrowed amount of a loan, not including interest
Promissory note
Represents a personal loan agreement that is a formal contract between a lender and borrower
Straight-line method
Method of calculating interest expense that allocates the same amount of premium or discount amortization for each of the bond’s payment periods
