Labor
Services provided by an entity's employees or contracted by outside parties.
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Land
Real property that is considered to have an indefinite life impossible to consume or use up. Therefore, it is not depreciable.
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Lease
An agreement under which the owner of property permits someone else to use it for a specified term and amount, after which the property is returned to the owner. The owner is called the lessor; the user is called the lessee.
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Leasehold improvement
Long-term improvements made to property that is held under a lease agreement. Usually thought of as expenditures that cannot be removed easily from the leased property when the lessee vacates.
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Ledger
A book for recording the monetary transactions of a business entity in the form of debits and credits. Entries recorded in the subsidiary journals are posted (recorded) to the general ledger as final entries.
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Leverage
Using debt capital (borrowed funds) in addition to equity capital (funds available from prior earnings of the business) for use in the business.
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Liability
An amount owed to a creditor.
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LIFO
Last-In, First-Out method of determining cost of sales. The cost of inventory purchased last is assumed to have been used first.
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Limited Liability Company
A corporation that has the pass-through features of a partnership.
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Line-of-credit
When a lender extends credit to an entity on demand up to specific amount. Generally, these funds are used to solve short-term cash shortages, such as when accounts receivable collections are slow. The payback schedule is based on cash-flow not an amortized term.
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Liquid asset
Cash or an asset that can be quickly turned into cash.
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Liquidation value
The value of assets that can be sold for cash.
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Liquidity
The ability of an entity to pay off its current liabilities.
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Long term liability
An obligation that will take longer than one year to satisfy.
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Loss
When the sales price of a fixed asset is lower than the fixed asset's book value.
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