See International Accounting Standards Board (IASB).
See International Accounting Standards Board (IASB).
This is the classification shown on a single-step income statement which reports the operating revenues, nonoperating revenues, and gains in one section of the income statement. Revenues and gains enhance the...
To receive money in exchange for a promise to repay the amount to the lender.
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
An amount that should be charged to the current accounting period as an expense.
A simple form of business where there is one owner. Legally the owner and the sole proprietorship are the same. However, for accounting purposes the economic entity assumption results in the sole proprietorship’s...
Market interest rate, current return, effective interest rate. Also see yield to maturity.
The current liability account which reports the amount of salaries earned by a company’s employees, but which have not yet been paid by the company.
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
The average time it takes for a retailer’s or manufacturer’s inventory to turn to cash. If a manufacturer turns its inventory six times per year (every two months) and allows customers to pay in 30 days, its...
What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
Magnetic ink character recognition.
record the $9 cash discount with a debit to the account Sales Discounts. The buyer will record the $9 savings as a credit to Purchase Discounts or as a reduction to the cost recorded in inventory. My dentist offers a 5%...
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
A revenue account that reports the sales of merchandise. Sales are reported in the accounting period in which title to the merchandise was transferred from the seller to the buyer.
See accrual-type adjusting entry.
A dollar adjusted for inflation. If an asset such as land was purchased for $10,000 many years ago when the consumer price index (CPI) was 100 and today the CPI is 400, today’s constant-dollar amount would be...
If a company earns a profit, which balance sheet items change? Definition of Profit Profit is the result of revenues minus expenses. How Profits Change the Balance Sheet Since all business transactions affect at least...
A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s pension plan during the period indicated in the heading on the income statement. Information on pensions...
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
The statistic known as the coefficient of correlation. The range of this statistic is -1 to +1. When this statistic is squared the result is the percentage change in the dependent variable y that is explained by the...
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
A check drawn on a bank. A cashier’s check leaves no doubt that the funds represented by the check are real. A bank money order or a certified check would also assure the payee that the funds are in the bank.
Usually a department within a company that is responsible for its costs but not revenues or profit.
would draw attention to the errors occurring when transactions were journalized, posted, account balances computed, etc. With accounting software, these clerical errors are unlikely.) Definition of Balance Sheet A...
Usually a plastic card that is used in place of writing a check. The amount of the transaction is immediately deducted from the user’s checking account.
What are marketable securities? Marketable securities are unrestricted financial instruments which can be readily sold on a stock exchange or bond exchange. Marketable securities are often classified into two groups:...
See interest revenues.
See chief financial officer.
See Explanation of Inventory and Cost of Goods Sold.
See external financial reporting.
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
Journals other than the general journal. Special or specialized journals include the cash receipts journal, the cash disbursements journal, the purchases journal, and the sales journal.
A lender or supplier who is owed money but does not have a lien on any of the assets of the company that owes the money. If the company that owes the money is liquidated, the unsecured lender receives money only after...
A reduction in the original selling price.
See generally accepted accounting principles (GAAP).
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