Glossary – Accounting

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There are 14 names in this directory beginning with the letter R.
Real account
Also known as a permanent account. Includes the balance sheet accounts (assets, liabilities, and owner’s or stockholders’ equity accounts) but excludes the owner’s drawing account, which is a temporary account.

Cash received. Receipts are different from revenues.

Reciprocal services
The situation where manufacturing service departments of a factory, provide service to each other.

Redemption of bonds payable
The repurchase of bonds by the issuer of the bonds.

Relevant cost
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building is not relevant. The additional travel expenses to the new territory and the additional sales from the new territory are relevant to the decision.

A qualitative characteristic in accounting. It is achieved when information is verifiable, objective (not subjective) and you can depend on it.

Residual income (RI)
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.

Return on investment (ROI)
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.

Revenue expenditure
An amount that is expensed immediately. For example, routine repair costs on equipment are revenue expenditures because they are charged directly to an income statement account such as Repairs and Maintenance Expense.

Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received at the time of delivery. Often the term income is used instead of revenues.

Residual income (RI).

Return on capital employed.

Return on investment (ROI).

Rule of 72
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your money earns 4%, your money will double in 18 years (72 divided by 4). If you earn 8%, your money will double in 9 years (72 divided by 8).
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