Unit 4: Tax accounting vs GAAP

Accrual basis accounting

the method of accounting in which income and expenditure are recorded at the date they are earned/incurred

Be consistent with

in agreement with, In accordance with

Depreciation

the method of allocating the cost of an asset over its useful life

Expense

show the full cost of something in the company

Fixed asset

an asset which is not consumed or sold during the normal course of business activities

Generally Accepted Accounting Principles

the common set of standards and procedures used by companies when preparing financial statements

Levy

impose or collect

Net earnings

a company's total revenue minus the operating expenses, depreciation, and interest paid and taxes

Omit

exclude, leave out

Public company

a firm which is permitted to sell shares in the firm to the general public

Reducing balance depreciation

a method of deprecation which imposes a set rate of depreciation on the remaining balance of the asset

Revenue

the amount of money a company receives over a given time frame

Significant

having or expressing meaning, important

Tax accounting

methods of accounting which focus on tax instead of the appearance of public financial statements

Taxable income

the amount of money on which tax is paid