Accounting for Debt Investments

These flashcards cover vocabulary related to accounting for debt investments, including definitions of key terms and concepts discussed in the lecture.

Dividends

Payments made by a corporation to its shareholders, typically as a distribution of profits.

Debt Security

A financial instrument that represents a loan made by an investor to a borrower, typically a corporation or government.

Present Value

The current value of a future sum of money or cash flows given a specified rate of return.

Cash Flows

The total amount of money being transferred into and out of a business.

Market Interest Rate

The prevailing rate of interest available for similar investments in the market.

Premium Bonds

Bonds that are sold for more than their face value because their interest rate is higher than the prevailing market rate.

Discount Bonds

Bonds sold for less than their face value because their interest rate is lower than the prevailing market rate.

Fair Value

The estimated worth of an asset based on current market conditions.

Amortization Schedule

A table detailing each payment on a loan, showing how much goes towards the principal and how much covers interest.

Effective Interest Method

An accounting method used to calculate the amortization of a bond's premium or discount.

Held to Maturity

A classification of investments where the investor intends to hold the securities until they mature.

Trading Securities

Financial instruments that are bought and held primarily for sale in the near term.

Available for Sale

Securities that are not classified as held to maturity or trading, and are reported at fair value.

Impairment

A reduction in the value of an asset when its fair value drops below its carrying amount.

Unrealized Gains/Losses

Increases or decreases in the value of an asset that have not yet been realized through a sale.

Cash Flow Statement

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents.