How Finance Works

 

Glossary

accounts payable A liability account used to show the obligation to pay suppliers that have provided goods or services on credit terms.

accounts receivable An asset account used to show the claim to receive cash at some future date for goods or services that have been supplied to a customer on credit terms.

accrual accounting An accounting method most companies follow; required under US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). The method follows the revenue recognition principle, which says that revenue should be recognized in the period in which it is earned, not necessarily when the cash is received, and the matching principle, which says that expenses should be recognized ...