of the Cash account. Examples of Net Cash Flows The net cash flows include the cash inflows such as the money received from customers who purchased products on credit in an earlier accounting period, cash sales...
of the Cash account. Examples of Net Cash Flows The net cash flows include the cash inflows such as the money received from customers who purchased products on credit in an earlier accounting period, cash sales...
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
See our Standard Costing Outline.
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
of an interest payment of $500 and a principal payment of $1,500. The company’s entry to record the loan payment will be: Debit of $500 to Interest Expense Debit of $1,500 to Loans Payable Credit of $2,000 to Cash The...
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
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See cash surrender value.
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
A word to describe whether a company is able to earn more revenues than expenses.
See certified public accountant.
An asset’s cost that has been assigned to Depreciation Expense.
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See inventory: work-in-process (WIP).
See Public Company Accounting Oversight Board (PCAOB).
A situation where there is correlation between the independent variables used in explaining the change in a dependent variable. When this condition exists, you cannot have confidence in the individual coefficients of the...
the costs of products are likely to change during an accounting year (seems there is always some inflation), a company must select a cost flow assumption that will be used consistently. Examples of cost flow assumptions...
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Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
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See accelerated depreciation.
Under the accrual basis of accounting, the Interest Revenues account reports the interest earned by a company during the time period indicated in the heading of the income statement. Interest Revenues account includes...
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
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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 reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
See bearer bond.
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
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A method of costing manufactured items that differs from normal costing and standard costing. Under actual costing each accounting period’s actual manufacturing overhead costs and each accounting period’s...
Some examples of intangible assets include copyrights, patents, goodwill, trade names, trademarks, mail lists, etc. These assets will be reported at cost (or lower) on the balance sheet after property, plant and...
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
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...
Federal Unemployment Tax Act. See federal unemployment tax.
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
Point of purchase.
. On the other hand, some companies are required by government regulations to end their accounting years on December 31, even though it is not the end of their natural business year. The term fiscal year is associated...
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