Glossary – Accounting

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There are 12 names in this directory beginning with the letter L.
Lower of cost or market.

Lead time
The time from when goods are ordered until the time when the goods are received.

Learning curve
An expectation that as a task is repeated there will be significant time reductions during the early repetitions. The time savings will dissipate after continuous performance. This is important to consider when setting the direct labor standard cost.

A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck for 60 months and the agreement cannot be canceled without purchasing the asset, it is possible the arrangement is more than a mere rental of equipment.

A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account balances for the general ledger account Accounts Receivable.

The party owning an asset and receiving rent from another party (the lessee).

Letter of credit
This is granted by banks only to very creditworthy customers. It states that the bank will guarantee amounts that its customer incurred when purchasing goods.

A claim on another party’s assets. For example, the bank will likely put a lien on your automobile if you want to borrow money and have no other collateral.

Last in, first out (LIFO).

Limited Liability Company.

Loan amortization schedule
A multi column listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of the payment is based on the unpaid principal balance after the previous payment. Usually the total payment remains constant and each period the interest portion of the payment decreases and the principal portion of the payment increases.

The result of the sale of an asset for less than its carrying amount; the write-down of assets; the net result of expenses exceeding revenues.