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...
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...
A right to buy a specific number of shares of stock at a specific price by a specific date.
An employee that must be paid overtime pay when the employee’s weekly hours exceed 40 hours. Some states may have additional requirements. Nonexempt employees include both hourly-paid and salary-paid who are not...
An abbreviation for the word account.
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
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...
Another word for purchasing.
A balance on the right side (credit side) of an account in the general ledger.
Is it acceptable for companies to use two methods of depreciation? Definition of Depreciation Methods There are various methods of depreciating assets that are used in a business. It is acceptable and common for...
Someone who performs a task for a company, but is not an employee. The IRS has criteria to assist in distinguishing between an independent contractor and an employee.
See International Accounting Standards Board (IASB).
Often a 1% or 2% discount that a buyer may deduct from the amount owed to a supplier (if stated on the supplier’s invoice) for paying in 10 days instead of the customary 30 days. The purchase discount is also...
The sum of future amounts multiplied by their respective probabilities of occurrence.
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
To repurchase bonds that the company had previously issued.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
The amount a company owes for expenses or losses incurred that have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting Entries.
A current liability account that reports the amounts owed to employees for hours worked but not yet paid as of the date of the balance sheet.
A budget that does not flex for changes in volume or activity.
See Explanation of Standard Costing.
Usually a claim on an asset that is pledged as collateral. The lien is usually filed with a government office.
The record of checks issued or written, deposits, bank charges, bank credits and the resulting balance. Also referred to as the check register.
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
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,...
The long term asset category of a classified balance sheet which appears immediately after the current assets. Listed in this category would be a bond sinking fund, funds held for construction, the cash surrender value...
An item that is dependent on another item. For example, your wages would be a dependent variable and the hours you work would be the independent variable. This relationship is often expressed as y = a + bx, where y is...
A statistic known as the coefficient of determination. This statistic indicates the percent change in the dependent variable that is explained by the change in the independent variable(s).
A structured market for trading stocks and bonds such as the New York Stock Exchange or NASDAQ. Capital market can also include less structured markets such as private placements.
Commitments are items that are not reported as liabilities as of the balance sheet date. Some of these items are reported in the notes to the financial statements. Examples include noncancelable contracts to rent space...
See budgetary slack.
A check drawn on a bank. A cashier’s check leaves no doubt that the funds represented by the check are real. A bank money order or a certified check would also assure the payee that the funds are in the bank.
An original record containing the details to substantiate a transaction entered in an accounting system. For example, the source document for a purchase of merchandise is the supplier’s invoice supported by the...
The first-in, first-out cost flow assumumption under the perpetual inventory system. The first (oldest) costs are the first costs removed from inventory at the time that goods are sold. The most recent costs will remain...
See sole proprietorship.
Generally a long term liability account containing the face amount, par amount, or maturity amount of the bonds issued by a company that are outstanding as of the balance sheet date. To learn more about bonds payable,...
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
A shortened version of the term bank reconciliation or bank statement reconciliation.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
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