Record to Report (R2R) Glossary
Comprehensive definitions, formulas, and journal entries for fixed assets, MACRS tax depreciation, FIFO/LIFO inventory, and lease capitalization.
Accumulated Depreciation
Cumulative contra-asset account offsetting gross historical asset cost on the balance sheet.
Accrued Expense
Liability recognized for goods or services received prior to invoice receipt or cash settlement.
Allowance for Doubtful Accounts
Contra-asset account estimating expected uncollectible receivables balances.
Amortization
Ratable expense allocation of intangible assets over their finite economic useful life.
Asset Turnover Ratio
Efficiency ratio measuring net revenue generated per dollar of average total assets.
Bad Debt Expense
Operating expense recognizing credit losses on uncollectible accounts receivable.
Book Value (Carrying Value)
Net historical cost of an asset recorded on the balance sheet after accumulated depreciation.
Book-to-Tax Difference
Discrepancy between GAAP financial accounting income and statutory taxable income.
Capitalized Software Cost
Internal-use software development expenditure capitalized as an asset during application development.
CECL Model (Current Expected Credit Losses)
Forward-looking accounting standard for estimating lifetime expected credit loss reserves.
Commercial Loan Amortization
Schedule breaking down periodic commercial loan payments into principal and interest.
Contra-Asset Account
Account with a credit balance offsetting a paired primary asset account on the balance sheet.
Cost of Goods Sold (COGS)
Direct inventory cost recognized on the income statement upon product sale.
Current Ratio
Short-term liquidity ratio measuring total current assets against current liabilities.
Days Sales in Inventory (DIO)
Average number of days required to convert inventory holdings into sold merchandise.
Deferred Tax Asset (DTA)
Future tax benefit resulting from temporary deductible differences or loss carryforwards.
Deferred Tax Liability (DTL)
Future tax obligation arising from temporary taxable differences (e.g. accelerated MACRS vs SL).
Depreciation Expense
Non-cash periodic charge allocating historical cost of tangible fixed assets over useful life.
Double Declining Balance (DDB)
Accelerated depreciation method applying twice the straight-line rate to beginning book value.
FIFO (First-In, First-Out)
Inventory valuation assumption that earliest purchased inventory units are sold first.
Fixed Asset Register (FAR)
Detailed sub-ledger tracking property, plant, and equipment assets, locations, and depreciation.
General Ledger (GL)
Master record of all financial accounts, debit/credit journal entries, and trial balance.
Half-Year Convention
Tax convention treating all assets placed in service during a tax year as placed at mid-year.
Impairment Loss
Write-down recognized when an asset carrying value exceeds its fair market value.
Intangible Assets
Non-physical long-term assets including patents, trademarks, software, and goodwill.
Inventory Reserve
Contra-asset account reducing inventory book value for obsolete or damaged merchandise.
Inventory Turnover Ratio
Ratio measuring how many times a company turns over its inventory balance annually.
Lease Capitalization (ASC 842)
Requirement recognizing right-of-use (ROU) assets and lease liabilities on balance sheet.
LIFO (Last-In, First-Out)
Inventory valuation assumption that most recently acquired units are sold first.
LIFO Reserve
Discrepancy between inventory balance valued under FIFO versus reported LIFO balance.
Liquidity Ratios
Metrics evaluating a firm’s capacity to settle short-term obligations as they mature.
Lower of Cost or Net Realizable Value (LCNRV)
Rule requiring inventory to be written down if market realizable value falls below cost.
MACRS (Modified Accelerated Cost Recovery System)
Mandatory U.S. federal tax depreciation system prescribing fixed recovery percentage tables.
Matching Principle
Core accounting rule dictating expenses must be recognized in the period revenue is generated.
Mid-Quarter Convention
Tax convention required when >40% of asset additions occur in Q4 of tax year.
Net Operating Loss (NOL)
Tax loss position occurring when tax-deductible expenses exceed taxable revenues.
Net Realizable Value (NRV)
Estimated selling price in ordinary business course less predictable completion/selling costs.
Net Working Capital (NWC)
Operational liquidity buffer calculated as current assets minus current liabilities.
Period Costs
Expenses expensed immediately in period incurred rather than capitalized into inventory.
Property, Plant & Equipment (PP&E)
Tangible fixed assets used in business operations with useful lives exceeding 12 months.
Quick Ratio (Acid-Test)
Solvency ratio measuring immediate liquid assets (cash, securities, AR) against current liabilities.
Retained Earnings
Cumulative net income retained in the business after equity dividend distributions.
Right-of-Use Asset (ROU Asset)
Balance sheet asset representing lessee right to use underlying asset during lease term.
Salvage Value (Residual Value)
Estimated resale value of a fixed asset at the conclusion of its useful life.
Section 179 Expensing
Tax provision allowing businesses to deduct full purchase cost of qualifying equipment immediately.
Straight-Line Depreciation
Depreciation method allocating equal periodic cost charges over asset useful life.
Sum-of-the-Years-Digits (SYD)
Accelerated depreciation method basing annual charge on remaining useful life fraction.
Temporary Tax Difference
Timing difference between GAAP book revenue/expense recognition and tax return filing.
Trial Balance
Internal report listing ending debit and credit balances for all general ledger accounts.
Units-of-Production Depreciation
Depreciation method tying periodic expense directly to actual machinery output volume.
Useful Life
Estimated period over which an asset is expected to remain economically productive.
Weighted Average Cost (WAC)
Inventory costing method averaging unit cost across all available inventory lots.