See electronic funds transfer.
See electronic funds transfer.
Operations of an entire division, subsidiary, or segment of a company where a formal plan exists to eliminate it from the company. (It involves more than pruning a product line of certain models of products.) The...
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
See Securities and Exchange Commission.
For example.
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...
Under the accrual basis of accounting this income statement account reports the amount of commissions expense that pertains to the revenues earned by the company during the accounting period shown in the heading of the...
See inventory conformity rule.
Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
The revenue classification used by nonprofit organizations to account for the amounts received as donations. It is also an expense classification for the donations made to another nonprofit organization. Contributions...
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
A term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
An abbreviation for the word account.
See last in, first out (LIFO).
Usually financial statements refer to the balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholders’ equity. The balance sheet reports information as of...
The sum of future amounts multiplied by their respective probabilities of occurrence.
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity due. An example would be the monthly rent on an apartment.
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
See long-term liabilities.
Market interest rate, current return, effective interest rate. Also see yield to maturity.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
See credit memo.
A company might construct a building and then sell the building to an investor who in turn leases the building back to the company.
The abbreviation of the accounting and bookkeeping term credit.
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
The provider of goods or services. Also known as the vendor.
Point of sale.
Amount of depletion charged to expense on the income statement for the period indicated in its heading. The amount is also credited to the contra asset account Accumulated Depletion.
The party receiving goods to be sold. See consigned goods.
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
Individuals elected by the common stockholders of a corporation to represent the stockholders and to establish the policies of the corporation. The board of directors appoints the officers of the corporation and declares...
See carrying amount.
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
The relationship between two variables. There can be correlation without a cause-and-effect relationship. Also see coefficient of correlation.
A word to describe whether a company is able to earn more revenues than expenses.
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
See deferred expense.
The products with significant value that emerge at a split-off point in a process. When a joint product has little value it is referred to as a by-product.
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
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