Are you into taxes, accounts and finances? Great stuff! We can help you with your financial vocabulary. On this article we help you with the following concepts:
- Cost of goods sold
- Credit
- Debit
- Deferred charges
- Deferred income
- Depreciation
- Discounted cash flow
- Dividend
- Double entry
- Earnings per share
- The 80-20 rule
Cost of sales, cost of goods sold | the expense or cost of all items sold during an accounting period. Each unit sold has a cost of sales or cost of the goods sold. In businesses with a great many items flowing through, the cost of sales or cost of goods sold is often computed by this formula: Cost of Sales = Beginning Inventory + Purchases During the Period ‐ Ending Inventory.
Credit | an accounting entry on the right or bottom of a balance sheet. Usually an increase in liabilities or capital, or a reduction in assets. The opposite of credit is debit. Each credit in a balance sheet has a balancing debit. Credit has other usages, as in «You have to pay cash, your credit is no good.» Or «we will credit your account with the refund.»
Debit | an accounting entry on the left or top of a balance sheet. Usually an increase in assets or a reduction in liabilities. Every debit has a balancing credit.
Deferred charges | see prepaid expenses.
Deferred income | a liability that arises when a company is paid in advance for goods or services that will be provided later. For example, when a magazine subscription is paid in advance, the magazine publisher is liable to provide magazines for the life of the subscription. The amount in deferred income is reduced as the magazines are delivered.
Depreciation | an expense that is supposed to reflect the loss in value of a fixed asset. For example, if a machine will completely wear out after ten year’s use, the cost of the machine is charged as an expense over the ten‐year life rather than all at once, when the machine is purchased. Straight line depreciation charges the same amount to expense each year. Accelerated depreciation charges more to expense in early years, less in later years. Depreciation is an accounting expense. In real life, the fixed asset may grow in value or it may become worthless long before the depreciation period ends.
Discounted cash flow | a system for evaluating investment opportunities that discounts or reduces the value of future cash flow. (See present value.)
Dividend | a portion of the after‐tax profits paid out to the owners of a business as a return on their investment.
Double entry | a system of accounting in which every transaction is recorded twice | as a debit and as a credit.
Earnings per share | a company’s net profit after taxes for an accounting period, divided by the average number of shares of stock outstanding during the period.
80 ‐ 20 rule | a general rule of thumb in business that says that 20% of the items produce 80% of the action | 20% of the product line produces 80% of the sales, 20 percent of the customers generate 80% of the complaints, and so on. In evaluating any business situation, look for the small group which produces the major portion of the transactions you are concerned with. This rule is not exactly accurate, but it reflects a general truth, nothing is evenly distributed.
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Inglés para empresas en Alicante, Murcia, Madrid y Andalucía