A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
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...
The type of stock that is present at every corporation. (Some corporations have preferred stock in addition to their common stock.) Shares of common stock provide evidence of ownership in a corporation. Holders of common...
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
A person or business that has a checking account or savings account at a bank.
An official pronouncement by the Financial Accounting Standards Board that involves a previously issued FASB Standard. FASB Interpretations are part of the generally accepted accounting principles.
Magnetic ink character recognition.
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
See incremental cost.
The total of interest and principal payments required to be paid on loans payable.
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
What is the meaning of aging? Definition of Aging In accounting, the term aging is often associated with a company’s accounts receivable. Accounts receivable arise when a company provides goods or services and allows...
The collection of money (currency, coins, checks). Not to be confused with revenues.
What are reversing entries and why are they used? Definition of Reversing Entries Reversing entries are made on the first day of an accounting period to remove accrual adjusting entries that were made at the end of the...
A term used to describe checks written by a company that have been received and paid by the bank on which they were drawn or written. The check number and amount will appear on the company’s checking account...
What is a standard cost? Definition of Standard Cost A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be”...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
Officers of a corporation are appointed by the board of directors to execute the policies that have been established by the board of directors. The officers include the chief executive officer (CEO), the chief operations...
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
See interest revenues.
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
What is a rubber check? A rubber check is a check that is not paid (or honored) by the bank on which it is drawn. The reason the check is not paid is the maker’s account had insufficient funds or not sufficient funds...
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial...
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...
What is net sales? Definition of Net Sales Under the accrual basis of accounting, net sales is the total amount of goods shipped/delivered to customers during a specified period of time minus any early payment discounts...
Future amounts that have been discounted to the present.
A bill issued by a seller of merchandise or by the provider of services. The seller refers to the invoice as a sales invoice and the buyer refers to the same invoice as a vendor invoice.
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
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...
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
What is the entry for the down payment from a signed contract? Definition of Down Payment on a Contract A down payment on a signed contract means a company has received money in advance of doing the work specified in the...
The provider of goods or services. Also known as the vendor.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
See line of credit.
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