A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the...
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
What is IFRS? IFRS is the acronym for International Financial Reporting Standards. IFRS is used throughout the world except in the United States where U.S. GAAP (generally accepted accounting principles) is followed....
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
An owner’s or stockholders’ equity account with a debit balance instead of the normal credit balance. Examples include the owner’s drawing account, a dividend account, and the treasury stock account.
See hurdle rate.
The interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.
See income statement. To learn more, see Explanation of Income Statement.
Would you please help me understand opportunity cost? You might think of opportunity cost as the profit you had to forego. Let’s illustrate this with a little story. Suppose that you are the sole owner of a company...
The repurchase of bonds by the issuer of the bonds.
An employee’s pretax compensation that is based on annual or monthly amounts rather than an hourly rate. Management employees are usually paid salaries. To learn more, see Explanation of Payroll Accounting.
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
Often this account appears as a line in the retained earnings section of stockholders’ equity (balance sheet) and will show the year-to-date net income. The reason is that some accounting software will not put the...
See full disclosure principle.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
Terms indicating that the buyer must pay to get the goods delivered. (The buyer will record freight-in and the seller will not have any delivery expense.) With terms of FOB shipping point the title to the goods usually...
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
See quick ratio.
What is bookkeeping? Definition of Bookkeeping Bookkeeping includes the recording, storing and retrieving of financial transactions for a business, nonprofit organization, individual, etc. Examples of Bookkeeping Tasks...
To learn more, see our Financial Ratios Outline.
See electronic funds transfer.
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
That component of a product that has not yet been placed into the product or into work-in-process inventory. This account often contains the standard cost of the direct materials on hand. A manufacturer must disclose in...
Factors that are used to convert future cash flows to their present value.
Life insurance without a cash value.
To record accounting entries into a journal.
See mixed expenses.
The basic general rules upon which more detailed accounting standards are built. To learn more, see Explanation of Accounting Principles.
An amount remaining after another amount is subtracted. In the accounting equation, owner’s equity is the residual of assets minus liabilities.
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
An income statement account showing the amount of vacation expense earned by employees (by working) during the specified accounting period.
The amount of temporary staffing costs that were used during the time interval indicated in the heading of the income statement.
An amount owed on bill or invoice from a vendor or supplier of goods or services.
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...
Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its assets....
Preferred stock where past, omitted dividends do not have to be paid before a dividend can be paid to common stockholders. In the case of noncumulative preferred stock, only its current year dividend needs to be paid in...
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