The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
See economic order quantity (EOQ) model.
This current liability account reports the amount of interest the company owes as of the date of the balance sheet. (Future interest is not recorded as a liability.)
What is a revenue expenditure? Definition of Revenue Expenditure A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place. Revenue expenditures are often discussed...
The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
See donor-imposed restriction.
A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. (Restricted cash should be recorded in a different account.)
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A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
See quality of earnings.
See premium on bonds payable.
An estimate of an asset’s market value
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Regression analysis with only one independent variable.
See accrued rent expense. Also see accrued rent income.
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
The percentage resulting from dividing the dividends per share by the market price per share.
See deferred expense.
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
See just-in-time (JIT).
What is a comparative income statement? A comparative income statement will consist of two or three columns of amounts appearing to the right of the account titles or descriptions. For example, the income statement for...
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
—as required by generally accepted accounting principles (GAAP)—and the profit that would have been reported if replacement cost had been used. For example, Company X sells products that are petroleum based. The...
This term refers to checking account balances. On a bank’s balance sheet, demand deposits are reported as current liabilities.
Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as “take home pay” or the amount the employee...
Also referred to as manufacturing overhead, factory overhead, indirect manufacturing costs, or manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
A legal entity organized under state laws that is considered separate from its owners. Ownership is evidenced by shares of stock.
The amount by which actual costs exceed the standard costs or budgeted costs. Also, the amount by which actual revenues are less than the budgeted revenues.
Another name for check.
The cost transferred from one department to the next department in a process costing system.
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
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