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Classification by nature means that an analysis based on the nature of expenses would, for example, result in classifications for depreciation, purchases, wages and salaries, marketing costs etc. The expenses would be presented in total for each type of expense.

Classification by function means that when an analysis is based on the function of the event (or cost of sales method), this will classify expenses according to their function as part of cost of sales, distribution or administrative activities. While this presentation can provide more relevant information to users, the allocation of costs to function can often be arbitrary. Organisations who chose to do this should disclose additional information on the nature of expenses, including depreciation and staff costs. The enterprise should choose the analysis that provides the fairest presentation of the business activities.

Read more: http://wiki.answers.com/Q/What_does_’Classification_by_nature_or_function’_mean#ixzz1ldTaH5PO

To report expenses by function means to report them according to the activity for which the expenses were incurred.

For a business, the reporting of expenses by function means the income statement will report expenses according to the following functional classifications: manufacturing, selling, general administrative, and financing.

For a not-for-profit organization, the reporting of expenses by function means the statement of activities will report expenses according to the following functional classifications: 1) each of its major programs, and 2) the supporting services which are a) management and general, b) fund-raising, and c) membership development.

(Classifying expenses according to salaries, electricity, repairs, etc. is referred to as natural classifications, or classifyng expenses by their nature.)

http://blog.accountingcoach.com/report-expenses-by-function/

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A value that is often included in the contributed surplus account in the shareholders’ equity section of a company’s balance sheet. The account represent the excess paid by an investor over the par-value price of a stock issue. Additional paid-in-capital can arise from issuing either preferred or common stock.

Investopedia explains ‘Additional Paid In Capital’

For example, assume that a company issues 1 million shares with a par value of $50 per share. When the shares are purchased by investors, however, they pay $70 per share - a premium of $20 over par value. When the capital received from this issue is recorded, $50 million ($50*1 million) will be allocated to a share capital or paid-in-capital account. The excess $20 million ($20*1 million) will be allocated to the contributed surplus account as additional paid-in-capital.

Some companies will choose to separate additional paid in capital from contributed surplus on their balance sheets.

Read more: http://www.investopedia.com/terms/a/additionalpaidincapital.asp#ixzz1lHeSrLTx

A company’s long-term investments, in the case that the full value will not be realized within the accounting year. Noncurrent assets are capitalized rather than expensed, meaning that the company allocates the cost of the asset over the number of years for which the asset will be in use, instead of allocating the entire cost to the accounting year in which the asset was purchased.

Investopedia explains ‘Noncurrent Assets’

Depending on the type of asset, it may be depreciated, amortized or depleted, but these are all just technical terms for allocation.

Examples of noncurrent assets include investments in another company, intangible assets such as goodwill, brand recognition and intellectual property, and property, plant and equipment. Noncurrent assets appear on the company’s balance sheet.

Read more: http://www.investopedia.com/terms/n/noncurrent-assets.asp#ixzz1lGQTS4gq

An accrual accounting method that companies use to allocate the cost of extracting natural resources such as timber, minerals and oil from the earth. Depletion is calculated for tax-deduction and bookkeeping purposes. Unlike depreciation and amortization, which mainly describe the deduction of expenses due to the aging of equipment and property, depletion is the actual physical depletion of natural resources by companies.
Entities that meet the IRS definition of having an economic interest in the property are eligible to claim deductions for depletion. For accounting and financial reporting purposes, depletion is meant to assist in accurately identifying the value of the assets on the balance sheet.

There are two types of depletion: percentage depletion and cost depletion. The IRS requires the cost method to be used with timber. It requires the method that yields the highest deduction to be used with mineral property, which it defines as oil and gas wells, mines, and other natural deposits (including geothermal deposits). 

Cost depletion is calculated by taking the property’s basis, total recoverable units and number of units sold into account. Percentage depletion looks at the property’s gross income and taxable income limit.

Read more: http://www.investopedia.com/terms/d/depletion.asp#ixzz1lGPH8gxw

EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Exchange Commission (SEC). Its primary purpose is to increase the efficiency and fairness of the securities market for the benefit of investors, corporations, and the economy by accelerating the receipt, acceptance, dissemination, and analysis of time-sensitive corporate information filed with the agency.

http://www.sec.gov/edgar/aboutedgar.htm

How Markets Fail: Positive & Negative Externalities

Positive externalities

Negative externalities