See full disclosure principle.
See full disclosure principle.
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
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...
Usually refers to a statement from the bank showing the activity in a company’s checking account. The statement includes the deposits received by the bank, checks paid by the bank, bank service charge, and other...
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
See uncleared check.
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
Pushing authority and decision making down to the managers and employees who are closer to the work.
The present fair market value.
Usually a department within a company that is responsible for its costs but not revenues or profit.
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
See chief financial officer.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
A sole proprietorship, partnership, or corporation organized for the purpose of earning profits and enhancing the financial position of the owners.
See cash surrender value.
A potential loss that is dependent upon some future event occurring or not occurring. If the loss is probable and the amount can be estimated, then the loss and a liability are recorded with a journal entry. If the loss...
Past omitted dividends on cumulative preferred stock. Generally these omitted dividends were not declared and, therefore, do not appear on the corporation’s balance sheet as a liability. However, they must be...
See donor-imposed restriction.
Advertising Expense is the income statement account which reports the dollar amount of ads run during the period shown in the income statement. Advertising Expense will be reported under selling expenses on the income...
Often referred to as write-up work, a compilation refers to financial statements prepared by an accountant without reviewing or auditing the amounts. Often the accountant merely takes a client’s amounts and...
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
See contingent gain.
A journal entry to correct an erroneous amount previously entered in the general ledger.
The person or business that receives a loan from a bank or other lender.
Bonds with one maturity date (as opposed to serial bond).
Actual changes in cash as opposed to accounting revenues and expenses.
Amounts spent for property, plant and equipment.
See first in, first out (FIFO).
The acronym for cost of sales or for the cost of services.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
Often referred to as fixed assets. This would include long term assets such as buildings and equipment used by a company. Plant assets (other than land) will be depreciated over their useful lives.
The percentage resulting from dividing the dividends per share by the market price per share.
An employee’s pretax compensation that is based on annual or monthly amounts rather than an hourly rate. Management employees are usually paid salaries. To learn more, see Explanation of Payroll Accounting.
A class of corporation stock that provides for preferential treatment over the holders of common stock in the case of liquidation and dividends. For example, the preferred stockholders will be paid dividends before the...
Inventory that is less than the expected amount. It might be associated with theft or damage.
See income statement. To learn more, see Explanation of Income Statement.
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
Regression analysis with only one independent variable.
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