be recorded as part of the cost of the asset. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh...
be recorded as part of the cost of the asset. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
A bond with collateral.
A diagram depicting a company’s hierarchy or chain of command, its business segments, functions, and departments.
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
What is a/c? Definition of a/c In accounting, a/c is the abbreviation for account. Example of a/c An accountant might leave the following note for a subordinate: “Please review the balance in the...
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
The revenue from the next unit.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
A revenue account that reports the sales of merchandise. Sales are reported in the accounting period in which title to the merchandise was transferred from the seller to the buyer.
The cost of the next unit.
See Explanation of Financial Ratios.
See fixed expenses.
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...
A formal written promise to pay interest every six months and the principal amount at maturity.
Checks which have been written, but have not yet cleared the bank on which they were drawn. In the bank reconciliation, outstanding checks are deducted from the balance per bank. To learn more, see Explanation of Bank...
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
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 common cost. Often refers to the costs prior to the point where several products emerge from a common process.
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
See purchase order.
entered as a debit and at least one account will have an amount entered as a credit. Further, the total amounts entered as debits must be equal to the total amounts entered as credits. Meeting these requirements will...
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...
Revenue that has been earned but not yet invoiced to the customer.
A loan having the security of a lien on the borrower’s real estate.
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
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Recording an entry in an account in the general ledger or in a subsidiary ledger.
See internal rate of return.
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