The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A table of factors that shows what the future value of $1 will grow to if invested at the rate shown in the column heading and compounded for the number of periods indicated in the row.
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
A company’s balance sheet that shows each item’s amount after it has been divided by the amount of total assets. In other words, current assets will be shown as a percentage of total assets. This will allow...
Often a U-shaped arrangement of the various machines involved in manufacturing a product. This layout eliminates the need to move the item being manufactured from one area or department of the factory to another. In...
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
A term that refers to a negative checking account balance. It arises when a company writes checks in excess of the amount it has on deposit in its checking account.
See direct labor efficiency variance.
A stated legal amount for each share of common stock. The par value for every share of common stock issued must be recorded in the separate stockholders’ equity account Common Stock.
See inventory: work-in-process (WIP).
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
A current asset account which contains the amount of investments that can and will be sold in the near future.
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
Usually a simple form used by the petty cash custodian in order to document small payments from a petty cash box.
Market interest rate, current return, effective interest rate. Also see yield to maturity.
See inventory shrinkage.
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...
A company’s receipts that appear on the company’s records but do not yet appear on the bank statement. For example, a retail store’s receipts of March 31 are deposited after banking hours on March 31 or...
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
Corporations whose stock is traded on stock exchanges. Also referred to as publicly-traded corporations.
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
See warranty liability.
A reduction in the cost of goods purchased that is allowed by the supplier based on the authorized return of goods. Also a general ledger account in which the purchase returns are recorded under the periodic inventory...
See external financial reporting.
The amount by which total costs will change when an activity is increased by one unit. In the equation of the line, y = a + bx, the variable cost rate is represented by ‘b’ and the units of activity are...
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...
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
Usually the difference between the cost of inventory at LIFO versus the cost of inventory at FIFO.
A word used by accountants to communicate that an expense has occurred and needs to be recognized on the income statement even though no payment was made. The second part of the necessary entry will be a credit to a...
The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at...
See contingent loss.
Obligations not reported as liabilities on the balance sheet.
See bank reconciliation.
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
Another company that supplies goods or performs services. Also known as a vendor.
The operating activities of a company, excluding the major segments of the company that are being discontinued.
See bearer bond.
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