Resources ❯ Accounting Terms

Commercial Paper

[kuh-MUR-shuhl PAY-pur]

What is the definition of Commercial Paper?

Commercial Paper refers to unsecured, short-term debt instruments issued by corporations, typically used for the financing of payroll, accounts payable, inventories, and meeting other short-term liabilities. These papers are usually issued at a discount from face value and reflect prevailing market interest rates.

Using Commercial Paper in an Example

A large corporation may issue commercial paper with a maturity period of 90 days to finance its inventory requirements. The funds obtained from these instruments help the company manage its short-term cash flow needs without needing to tap into a more formal line of credit.

Using Commercial Paper in a sentence

The finance manager suggested investing in commercial paper to utilize the company's excess cash efficiently, as it offers a higher return compared to bank deposits.

Related Terms

Cost Recovery Method

A method of revenue recognition in which profits are recognized only after all costs incurred are completely recovered. This method is typically used when the total amount of collections is highly uncertain.

Cost Segregation

The process of identifying and reclassifying personal property assets that are grouped with real property assets for depreciation purposes. This process allows the personal property assets to be depreciated over a shorter recovery period than the real property assets.

Cost of Capital

The rate of return that a business must earn on its investment projects to maintain its market value and attract funds. It represents the opportunity cost of making a specific investment, instead of investing the same funds in an alternative venture with equivalent risk.

Cost of Goods Sold

Cost of Goods Sold (COGS) represents the direct costs associated with the production of goods sold by a company. This includes the cost of the raw materials and labor used in the production of these goods.

Coupon

The interest rate on a debt security that the issuer promises to pay to the holder until maturity, expressed as an annual percentage of the face value.

Coupon Bond

A bond that is typically not registered with the issuing corporation and carries detachable coupons. These coupons state the amount of interest due and the payment date, which the holder must present to receive interest payments.

Coverdell Education Savings Account (Education IRA)

A tax-exempt trust exclusively established for the purpose of paying the qualified education expenses of the designated beneficiary, which can include higher education costs as well as elementary and secondary education expenses.

Credit

In double-entry bookkeeping, a credit is an entry on the right side of an account ledger that represents the increase in a liability, revenue, or equity account, or the decrease in an asset or expense account.

Credit Agreement

A legally binding contract in which one party provides funds or resources to another with the agreement that the receiver will repay the amount on a future date, potentially with additional interest or fees.

Credit Balance

A balance remaining after accounting entries that represents a liability or income to the entity, often indicating the amount that the entity owes to others or has in surplus.

Creditor

A party that loans money or other assets to another party, typically expecting repayment with terms agreed upon by both parties.

Current Asset

An asset that is expected to be converted into cash, sold, or consumed in operations within one operating cycle or within a year if more than one cycle is completed annually.

Current Liability

An obligation whose liquidation is expected to require the use of existing resources classified as current assets, or the creation of other current liabilities, typically due within one year.

Current Ratio

A financial metric used to evaluate a company's ability to pay off its short-term liabilities with its short-term assets. The current ratio is calculated by dividing the company's current assets by its current liabilities.

Current Value

The present worth of an asset, calculated either based on its current market price compared to its historical cost, or by discounting the future revenue stream of the asset using compound interest principles.

Current Yield

The annual interest received from a bond expressed as a percentage of its current market price.

Deferred's AI 1031 Research Assistant is trained on 8,000+ pages of US tax law and outperforms human CPAs by 22%+

Deferred.com Resources

Recent Posts

Can you 1031 exchange a vacation home?

Because the 1031 Exchange rules permit owners to use the property part of the year, exchangers can have a cash-flowing, appreciating investment that also serves as their semi-permanent vacation property.

1031 Improvement Exchange

Learn how a 1031 Improvement Exchange can enable a value-add real estate investment strategy while also deferring capital gains taxes.

1031 Exchange Examples

Review some common 1031 exchange examples and take advantage of our profit-generating ideas to use the 1031 Exchange to make your property portfolio more profitable.

What are the disadvantages of a 1031 exchange?

The 1031 Exchange is a great way for businesses and investors to take advantage of the additional value of their real estate and put it into their next purchase, but are there tradeoffs to consider?

What Happens to Depreciation in a 1031 Exchange?

Depreciation recapture is a process then enables the IRS to collect taxes on the financial gain you have made from the sale of an asset. Exactly what depreciation recapture rate will apply will depend on your individual circumstances.

Form 6252: Report an Installment Sale

Use this form to report income from an installment sale on the installment method.