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What is the consistency principle? Definition of Consistency In accounting, consistency requires that a company’s financial statements follow the same accounting principles, methods, practices and procedures from one...
A bond issued with a series (or staggering) of maturity dates.
The difference between the actual amount and the budgeted amount.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
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...
The indirect manufacturing costs actually incurred during an accounting period.
’ equity section of the balance sheet, the cash that was generated from those retained earnings is not likely be in the company’s checking account. Instead, the corporation likely used the cash to acquire additional...
Sending merchandise to another party (an agent, consignee) in order to sell the merchandise. Also see consigned goods.
Federal Unemployment Tax Act. See federal unemployment tax.
An Italian monk associated with debits, credits, and double-entry accounting approximately 500 years ago.
An amount owed on bill or invoice from a vendor or supplier of goods or services.
The additional cost of an additional quantity. It is similar to marginal cost, except that marginal cost refers to the cost of the next unit. Incremental cost might be the additional cost from the next 200 units.
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...
This activity, which involves playing the float, is sometimes used when a company is facing an overdrawn checking account. Assume that a company has a checking account at NY Bank that is about to overdraw. To prevent the...
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 assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
See cash surrender value.
What is depreciation? Definition of Depreciation In accounting, depreciation is the assigning or allocating of the cost of a plant asset (other than land) to expense in the accounting periods that are within the...
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...
A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...
The best fitting line through a series of points as determined by the least-squares method.
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
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 simple form of business where there is one owner. Legally the owner and the sole proprietorship are the same. However, for accounting purposes the economic entity assumption results in the sole proprietorship’s...
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in an account that normally has a debit balance, or a debit balance in an account that normally has a credit balance A credit entry, when a debit entry will not have parentheses An unfavorable variance in standard...
A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.
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...
See notes to financial statements.
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
An amount that is expensed immediately. For example, routine repair costs on equipment are revenue expenditures because they are charged directly to an income statement account such as Repairs and Maintenance Expense.
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
See inventory: work-in-process (WIP).
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
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