What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
To learn more, see Explanation of Depreciation.
See job order costing.
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
A check that has been issued but has not yet been paid by the bank on which it is drawn. An uncleared check is also known as an outstanding check.
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
What is gross profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Gross profit is sometimes referred to as gross margin. (However, gross margin can also mean the gross...
The term associated with payroll deductions from an employee’s gross wages or gross salary.
See notes to financial statements.
as the borrower or debtor and records the amount owed in a liability account such as Notes Payable. The person or organization that has the right to receive the money when the promissory note comes due is known as the...
See first-in, still here (FISH).
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
The amount of vacation that an employee has earned but has not yet taken.
The last-in, first-out cost flow assumption under the perpetual inventory system. The last (most recent) costs as of the time that goods are sold are the first costs removed from inventory. The oldest costs as of the...
See inventory shrinkage.
See just-in-time (JIT).
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
See direct costing.
Someone who has granted credit. If a bank lends a company money, the bank is a creditor. If a supplier sold merchandise to a company on credit, the supplier is a creditor.
The time required to set up a piece of production equipment.
See return on capital employed.
For example.
What are capital expenditures? Definition of Capital Expenditures Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital...
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
The time between when a check is written and when the check clears the bank account on which it is drawn.
Merchandise that is not owned by the party in possession of the goods. For example, a craftsperson might have produced 100 ornate wood items. In order to sell the items, the person asks a local merchant to take five of...
See Public Company Accounting Oversight Board (PCAOB).
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...
A quality of accounting information that facilitates the comparison of financial reporting of one company to the financial reporting of another company.
What is the difference between biweekly and semimonthly payroll? Definition of Biweekly Payroll Biweekly payroll refers to paydays that occur 26 times per year (52 weeks in a year divided by 2 weeks = 26 times per year)....
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
What is a favorable variance? Definition of a Variance In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company’s budget for...
Receivables due from customers. See accounts receivable.
See return on investment (ROI).
Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
Under the accrual basis of accounting this income statement account reports the amount of commissions expense that pertains to the revenues earned by the company during the accounting period shown in the heading of the...
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