Also referred to as a sunk cost. A past cost is not relevant to a decision.
Also referred to as a sunk cost. A past cost is not relevant to a decision.
The Roman numerals that indicate 1,000,000.
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
See fixed manufacturing overhead volume variance.
See deferred expense.
differences. Since most companies use the double-entry system of accounting, any omission or error in the company’s general ledger Cash account also means that at least one other general ledger account will have a...
The process of comparing the amounts in the Cash account in the general ledger to the amounts appearing on the bank statement. The objective is to be certain that there is consistency between the amounts and that the...
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
The difference between the call price of a bond or preferred stock and its stated or par value.
A decentralized division of a corporation which is responsible for and has control over its costs, revenues, and investments.
See Explanation of Inventory and Cost of Goods Sold.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
A right to buy a specific number of shares of stock at a specific price by a specific date.
A major repair such as an engine overhaul, which will extend the useful life of the asset. The amount should be recorded in the asset account and then depreciated over the remaining life of the asset.
The allocation to expense of the cost of an intangible asset such as a patent or goodwill.
A balance on the right side (credit side) of an account in the general ledger.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
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...
This term refers to checking account balances. On a bank’s balance sheet, demand deposits are reported as current liabilities.
See inventory: work-in-process (WIP).
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
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.
The statistic known as the coefficient of correlation. The range of this statistic is -1 to +1. When this statistic is squared the result is the percentage change in the dependent variable y that is explained by the...
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
The indirect manufacturing costs actually incurred during an accounting period.
Usually refers to manufacturing overhead costs such as factory supplies, factory depreciation, indirect factory labor, etc. To learn more, see Explanation of Manufacturing Overhead.
Sending merchandise to another party (an agent, consignee) in order to sell the merchandise. Also see consigned goods.
An Italian monk associated with debits, credits, and double-entry accounting approximately 500 years ago.
The record of checks issued or written, deposits, bank charges, bank credits and the resulting balance. Also referred to as the check register.
An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
The person paying rent for using but not owning the asset.
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
An individual owner of a business that is not incorporated.
A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant...
A stock split, such as a 2-for-1, means that every stockholder will have twice as many shares as was held previously. Accordingly, the market price per share after the split should be one-half of the market price...
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
A liability account in a bank’s general ledger that indicates the amounts owed to bank customers for the balances in the customers’ individual checking, savings, and certificate of deposit accounts.
What does debit memo mean on a bank statement? Definition of Bank Debit Memo A debit memo on a company’s bank statement refers to a deduction by the bank from the company’s bank account. In other words, a bank debit...
could clear (be paid from) the bank account prior to that date. Post-dating a check makes sense only if you are certain that the payee will not cash or deposit the check before the date appearing on the check. Example...
See chief executive officer.
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