Posting The process of transferring
the debits and credits from the journal
entries to the accounts in the ledger.
(p. 160)
Preferred stock A class of stock with
preferential rights over common stock.
(p. 498)
Premium The excess of the issue price
of a stock over its par value. (pp. 457,
499)
Prepaid expenses Items that are initially
recorded as assets but are expected to
become expenses over time or through
the normal operations of the business;
often called deferred expenses. (pp. 12,
101)
Present value The current value of
dollars received in the future, after
considering the effects of compound
interest. (p. 448)
Present value of $1 The present value
interest factor for a single sum. This
amount is used to convert a single
lump sum of money at some point in
the future to its value in today’s dollars.
(p. 448)
Present value of an annuity of $1 The
present value interest factor for an annu-
ity. This amount is used to convert an
annuity to its value in terms of a single
sum in today’s dollars. (p. 451)
Price-book ratio The ratio of the market
value of a share of common stock to the
book value of a share of common stock.
(p. 554)
Price-earnings (P/E) ratio The ratio
computed by dividing a corporation’s
stock market price per share at a specific
date by the company’s annual earnings
per share. (pp. 552, 651)
Proceeds The net amount available
from discounting a note payable.
(p. 443)
Profit margin A measure of the
amount earned on each dollar of sales,
calculated as the ratio of net income
to net sales. (p. 640)
Proprietorship A business owned by
one individual. (p. 5)
Purchase return or allowance From
the buyer’s perspective, returned mer-
chandise or an adjustment for defective
merchandise. (p. 215)
Purchases discounts Discounts taken
by the buyer for early payment of an
invoice. (p. 215)Quick assets Cash and other current
assets that can be quickly converted
to cash, such as cash, marketable secu-
rities, and receivables. (pp. 464, 648)
Quick ratio A financial ratio that mea-
sures the ability to pay current liabilities
with quick assets (cash, marketable se-
curities, accounts receivable). (pp. 464,
648)
Quick response A method for optimiz-
ing inventory levels in the value chain
by electronically sharing common fore-
cast, inventory, sales, and payment in-
formation between manufacturers and
merchandisers, using the Internet or
other electronic means. (p. 281)
Rate earned on stockholders’ equity
A measure of profitability computed by
dividing net income by total stockholders’
equity. (p. 636)
Rate earned on total assets A measure
of the profitability of assets, without
regard to the equity of creditors and
stockholders in the assets, calculated as
the net income divided by average total
assets. (p. 636)
Ratio of fixed assets to long-term
liabilities A leverage ratio that mea-
sures the margin of safety of long-term
creditors, calculated as the net fixed
assets divided by the long-term liabili-
ties. (p. 648)
Ratio of liabilities to stockholders’ equity
A comprehensive leverage ratio that
measures the relationship of the claims
of creditors to that of owners, calculated
as total liabilities divided by total stock-
holders’ equity. (p. 649)
Ratio of total liabilities to total assets
The percent of total assets that are
funded by total liabilities; a measure of
solvency. (p. 466)
Receivables All money claims against
other entities, including people, business
firms, and other organizations. (p. 356)
Report form The form of balance sheet
in which assets, liabilities, and stock-
holders’ equity are reported in a down-
ward sequence. (p. 218)
Residual value The estimated value of
a fixed asset at the end of its useful life.
(p. 405)
Restructuring charge The cost of ac-
crued employee termination benefits
associated with a management-
approved employee termination plan.
(p. 539)Retained earnings Net income retained
in a corporation. (p. 16)
Retained earnings statement A summary
of the changes in the retained earnings
in a corporation for a specific period of
time, such as a month or a year. (p. 15)
Revenue The increase in assets from
selling products or services to customers.
(p. 12)
Revenue expenditures Costs that benefit
only the current period or costs incurred
for normal maintenance and repairs of
fixed assets. (p. 403)
Rules of debit and credit Standardized
rules for recording increases and
decreases in accounts. (p. 156)
Sales The total amount charged to
customers for merchandise sold, includ-
ing cash sales and sales on account.
(p. 215)
Sales discounts From the seller’s per-
spective, discounts that a seller may offer
the buyer for early payment. (p. 215)
Sales return and allowance From the
seller’s perspective, returned merchan-
dise or an adjustment for defective
merchandise. (p. 215)
Sarbanes-Oxley Act of 2002 An act
passes by Congress to restore public
confidence and trust in the financial
statements of companies. (p. 306)
Selling expenses Expenses that are
incurred directly in the selling of mer-
chandise. (p. 217)
Serial bonds Bonds whose maturities
are spread over several dates. (p. 447)
Service A type of business that provides
services rather than products to cus-
tomers. (p. 5)
Single-step income statement A form of
income statement in which the total of
all expenses is deducted from the total
of all revenues. (p. 217)
Special-purpose fund A cash fund used
for a special business need. (p. 326)
Stated value A value, similar to par
value, approved by the board of direc-
tors of a corporation for no-par stock.
(p. 497)
Statement of cash flows A summary of
the cash receipts and cash payments for
a specific period of time, such as a
month or a year. (pp. 15, 580)
Statement of stockholders’ equity This
statement is often prepared in a columnarG-6 Glossary