valuation account
Học thuậtThân thiện
A company's accountant reviews the valuation account in the financial ledger.
Definition
Noun: A valuation account is a reserve fund established by a company. It is created by allocating a portion of the company's profits. Its primary purpose is to account for potential decreases or changes in the value of the company's assets over time.
Usage
A valuation account is used in accounting to adjust the book value of an asset to reflect its current market value or to account for potential losses. It is a contra account, meaning it has a balance opposite to the asset account it is associated with (e.g., a credit balance against an asset's debit balance).
Examples
- The company's balance sheet shows a significant valuation account for its investment portfolio.
- After the market downturn, the finance team recommended increasing the valuation account for inventory.
- Auditors reviewed the valuation account for accounts receivable to ensure adequate provision for doubtful debts.
Advanced Usage
- Allowance for Doubtful Accounts: A common type of valuation account used to estimate the portion of accounts receivable that may not be collectible.
- Accumulated Depreciation: A valuation account used to record the decrease in value of a fixed asset (like machinery or buildings) over its useful life.
Variants and Related Words
- Allowance account: Often used synonymously, especially in the context of receivables.
- Contra account: The general accounting category to which a valuation account belongs.
- Provision: A broader term for funds set aside for anticipated liabilities or asset value reductions.
Synonyms
- Allowance
- Reserve
- Contra-asset account
Antonyms
- There is no direct antonym, as it is a specific accounting term. Conceptually, it contrasts with an account that records asset value increases (like certain revaluation reserves).
Related Phrases
- To maintain a valuation account: The act of managing and adjusting this reserve.
- The firm must maintain a valuation account for its overseas investments due to currency fluctuation risks.
- Charge against profits: Describes how the fund is created.
- The valuation account was funded by a substantial charge against this year's profits.
A company's accountant reviews the valuation account in the financial ledger.
Noun
- a reserve fund created by a charge against profits in order to provide for changes in the value of a company's assets