Dictionary of...Accounting Terms
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bad debt expense
- This is an operating expense resulting from making sales on credit and not collecting the customers' entire accounts receivable balances.
balance per bank
- A phrase used in reconciling the bank statement. It refers to the ending balance shown on the bank statement.
balance per books
- The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
balance sheet
- One of the main financial statements. The balance sheet reports the assets, liabilities, and owner's (stockholders') equity at a specific point in time, such as December 31. The balance sheet is also referred to as the Statement of Financial Position. To learn more, see Explanation of Balance Sheet.
balance sheet account
- Asset, liability, and owner's equity accounts. Also referred to as permanent or real accounts.
bank errors
- Errors made by the bank on a company's bank account. These are usually infrequent but could include an incorrect amount of a check or deposit or a check or deposit recorded in the wrong account.
bank overdraft
- A negative balance in the bank's records for the company's checking account.
bank reconciliation
- The process of comparing the amounts in the Cash account in the general ledger to the amounts appearing on the bank statement. The objective is to be certain that there is consistency between the amounts and that the company's amounts are accurate and complete.
bank service charge expense
- This is an administrative expense which reports the fees incurred by a company for the expenses associated with its checking account transactions.
bank statement
- Usually refers to a statement from the bank showing the activity in a company's checking account. The statement includes the deposits received by the bank, checks paid by the bank, bank service charge, and other amounts transferred into and out of the checking account.
basic accounting equation
- See accounting equation.
batch-level activities
- Activities involving a batch of products--as opposed to individual items. An example of a batch activity is the setting up of a machine to produce a batch of 1,000 identical items.
batch-level cost
- A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must then be allocated to the 5,000 items included in the batch.
batch size
- In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.
bill of materials
- A listing of the materials included in a product. A bill of material could be thought of as a bakery's recipe for producing one of its products.
biweekly
- Usually means every two weeks. For example, if an employee is paid every other Thursday, the employee is paid biweekly. The person paid biweekly will receive 26 paychecks per year. (People paid two times per month – on the 15th and on the last day of the month – are said to be paid semimonthly and will receive 24 paychecks per year.)
blue-collar worker
- A term often used when referring to production workers and other workers who are paid with an hourly pay rate. These workers’ compensation is referred to as "wages" (as opposed to salaries).
board of directors
- Individuals elected by the common stockholders of a corporation to represent the stockholders and to establish the policies of the corporation. The board of directors appoints the officers of the corporation and declares dividends for the common and preferred stock.
bond
- A formal written promise to pay interest every six months and the principal amount at maturity.
bond call price
- The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of bond's face amount.
bond coupon rate
- The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
bond discount
- See discount on bonds payable.
bond indenture
- A document that discloses various conditions and terms of the company's bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
bond interest expense
- The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company's bonds payable. Bond interest expense includes a portion of the premium or discount on bonds payable that applies to the time interval shown on the income statement.
bond interest rate
- The interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.
bond issue costs
- Bond Issue Costs is a noncurrent (or long-term) asset reported on the balance sheet under the classification of "other asset". Bond Issue Costs include the professional fees and registration fees associated with the issuance of bonds. The amount in the account Bond Issue Costs will be amortized (systematically written off) to expense on the income statement over the life of the bonds.
bond issue cost expense
- The portion of bond issue cost that pertains to the time interval indicated in the heading of the income statement. For example, if a company incurs bond issue costs of $120,000 when issuing a 20-year bond, the bond issue cost expense will be $6,000 per year, or $500 per month.
bond premium
- See premium on bonds payable.
bond sinking fund
- A restricted asset for the purpose of retiring a bond.
bonds payable
- Generally a long term liability account containing the face amount, par amount, or maturity amount of the bonds issued by a company that are outstanding as of the balance sheet date.
book depreciation
- The depreciation computed for financial reporting purposes--as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
book of original entry
- Also known as a journal.
book value
- The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner's or stockholders' equity.
book value of a company
- The amount of owner's equity or stockholders' equity reported on a company's balance sheet. This is not an indication of the company's fair market value.
book value of an asset
- The book value of an asset is the asset's cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset's fair market value. The book value of an asset is also referred to as the asset's carrying value.
book value per share of stock
- A corporation's total stockholder equity (excluding preferred stock) divided by the number of shares of common stock outstanding.
bookkeeping
- The recording of a company's transactions into the accounts contained in the general ledger. It is usually associated with the accounting tasks prior to the preparation of the trial balance. To learn more, see Explanation of Bookkeeping.
books
- A term to mean the company's general ledger or accounting records.
bottom line
- In accounting this term means a company's net income, which is the bottom line of the income statement.
bounced check
- See not sufficient funds (NSF) check.
break-even analysis
- To learn more, see Explanation of Breakeven Point.
break-even point
- To learn more, see Explanation of Breakeven Point.
budget variance
- The difference between the actual amount and the budgeted amount.
buildings
- Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account Depreciation Expense and crediting the balance sheet account Accumulated Depreciation.
byproduct
- A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
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