The total of interest and principal payments required to be paid on loans payable.
The total of interest and principal payments required to be paid on loans payable.
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
What is an unpresented check? An unpresented check is a check written by a company and entered in its records, but the check has not yet cleared the company’s checking account. In other words, the check has not yet...
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
four months earlier and the check has not yet cleared the company’s bank account. Example of Writing Off an Old Outstanding Check On January 22, a company issued a check for $124 for a business expense. As of June 30,...
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...
A division or department of a business whose managers are responsible for both revenues and expenses.
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
The generally accepted accounting principles practiced in the United States.
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
See not sufficient funds (NSF) check.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
More formally known as the Uniform CPA Examination. This rigorous, 14-hour, computer-based exam consists of questions developed by the American Institute of Certified Public Accountants. The exam is in English only and...
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
A constant or unchanging amount that is often used when referring to petty cash. For example, if the petty cash account in the general ledger has an imprest balance of $100, the account balance will be a constant $100....
In accounting this refers to the multiplication of quantity times price, or number of units times price or cost per unit.
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.
Will the adjusting entry amounts appear in the balance sheet and income statement? Absolutely. The adjusting entry amounts must be included on the income statement in order to report all revenues earned and all expenses...
which is lower than the market interest rate for similar bonds. The difference between the amount received and the face or maturity amount is recorded in the corporation’s general ledger contra liability account...
The benefit foregone by choosing another course of action. Also known as the opportunity cost. The lost opportunity is sometimes measured by the lost contribution margin (sales minus the related variable costs).
their personal income tax returns based on the calendar year of January 1 through December 31. Many U.S. corporations also have accounting and income tax years that coincide with the calendar year of January 1 through...
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...
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.
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...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
A liability account that reports the amount payable as of the balance sheet date. For the account to show a balance, a loss/obligation must be probable and the amount can be estimated. If the lawsuit is remote or only...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
Suppliers. Companies that provide goods or services.
Under the accrual method of accounting, the account Salaries Expense reports the salaries that employees have earned during the period indicated in the heading of the income statement, whether or not the company has yet...
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
What is ERP? Definition of ERP In accounting, ERP is the acronym for enterprise resource planning. ERP could be described as a database software package that supports all of a business’s processes and operations...
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...
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