Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
See job order costing.
The discounted value of a series of equal amounts occurring at the beginning of each equal time interval.
The actual cost incurred for manufacturing costs that does not change as production volume changes. Examples include the property tax, rent, and depreciation of the factory building and equipment, and the salaries of the...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
A tax imposed on income earned by a nonprofit that is unrelated to its exempt purpose.
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for...
Preferred stock that is callable by the issuer at a certain price. The price and other conditions are disclosed in the preferred stock’s indenture.
An asset account which reports the carrying amount of a company’s investment in another enterprise.
Usually an annual manufacturing overhead rate established just prior to an accounting year and based on budgeted amounts.
See dividends in arrears.
The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...
See units of production method of depreciation.
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
A liability account used to record an amount received from a customer before a service has been provided or before goods have been shipped. This account is referred to as a deferred revenue account and could be entitled...
Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
See Explanation of Standard Costing.
Under the accrual method of accounting, the account Salaries Expense: Delivery Dept reports the salaries that the employees in the delivery department have earned during the period indicated in the heading of the income...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
A tax status allowed by the U.S. Internal Revenue Service.
A restricted asset for the purpose of retiring a bond.
the $560 of wages payable that Jane had earned and the company owes as of December 31. (The company’s income statement for the year that ends on December 31 must also report the $560 as part of its wages expense.) The...
A mathematical technique that determines the best-fitting line through a series of points. This is used in regression analysis.
A balance sheet liability account which reports the total amount owed to employees at the balance sheet date for future vacation days as a result of the employees’ past work.
See CPA Exam.
The amount that would be agreed upon by two independent persons. The amount to be received in the ordinary course of business in an arm’s length transaction.
The percentage resulting from dividing dividends per share by earnings per share.
costs must be reported as Advertising Expense at the time the ads are run. A prepayment of the cost of ads that will air in the future should be recorded in a current asset account such as Prepaid Advertising. When the...
The fixed manufacturing costs (e.g., property tax, rent, and depreciation on factory) that have been assigned to (absorbed by) the products manufactured via a predetermined rate. Ideally, by the end of the accounting...
What is the difference between an unadjusted trial balance and an adjusted trial balance? Difference between Unadjusted Trial Balance and Adjusted Trial Balance The differences between an unadjusted trial balance and an...
Assigning more manufacturing overhead to production than the amount that was actually incurred.
See cost of goods sold.
This term is often associated with an investment in the common stock (and/or preferred stock) of a corporation when the stock is publicly traded.
A balance sheet line to report short-term assets that are too insignificant to be identified separately.
A retirement plan that does not specify the amount that a retiree will receive. Rather, the employer’s obligation is to contribute a specific amount into a fund to be used for payments to retirees.
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
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