RESIDUAL EQUITY THEORY Definition

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RESIDUAL EQUITY THEORY is the theory that common stockholders are considered to be the real owners of the business, i.e., Assets - Liabilities - Preferred Stock = Common Stock.

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COMPOUND INTEREST PRINCIPLE is where the interest is computed on principal plus interest earned in previous periods.

ACCRUED LIABILITY are liabilities which are incurred, but for which payment is not yet made, during a given accounting period. Some examples in a manufacturing environment would be: wages, taxes, suppliers/vendors, etc.

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