All memos tagged #accounting-lexicon

Bookkeeping is the recording of a business's day-to-day financial transactions — sales, purchases, receipts, and payments — so that accurate financial statements can be prepared from them....

Stock Options are the traditional way that venture-backed companies enable employees to build equity in a company. A stock option is the right, but not the obligation, to purchase a certain stock at...

Convertible Notes, and their more modern Silicon Valley counterpart SAFE Notes, are a way to take an investment in a company without the time and expense of doing a "priced round." Convertible Notes...

Net Orderly Liquidation Value (NOLV) is the estimated amount that could be recovered by selling a set of assets in an orderly sale, after the costs of liquidation, and it is how a lender decides how...

The General Ledger (GL) is a company's master record of accounts, where every financial transaction is ultimately posted and from which the financial statements are built. Transactions are first...

An Income Statement shows the company's revenues and expenses during a particular period of time. It indicates how the revenues are transformed into the net income or net profit. Revenue Cost of...

Deep inside equity accounting auditors produce a “roll-forward“. A roll forward is simply the recognition that the starting balance, plus or minus any changes in the period equals the ending balance....

A chart of accounts (COA) is a list of financial accounts for recording transactions in a company’s accounting system. Balance Sheet Accounts 1000 Assets 2000 Liabilities 3000 Equity Income Statement...

An Accrued Liability is an expense a business has incurred but not yet paid or been billed for, recorded on the balance sheet as a liability until the payment is made. Accrued liabilities, also...

Accrual Accounting is the practice of recording revenue when it is earned and expenses when they are incurred, rather than when money is received into or spent from the bank account. Accrual...

A Marginal Income Statement expresses every component of an Income Statement as a percentage of revenue, so that each line shows how many cents of every revenue dollar it consumes or leaves behind....