resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
See discounted cash flow model.
Bonds with one maturity date (as opposed to serial bond).
See membership dues.
Checks which have been written, but have not yet cleared the bank on which they were drawn. In the bank reconciliation, outstanding checks are deducted from the balance per bank. To learn more, see Explanation of Bank...
A balance sheet liability account that reports amounts received in advance of being earned. For example, if a company receives $10,000 today to perform services in the next accounting period, the $10,000 is unearned in...
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
What are the effects of overstating inventory? Definition of Overstating Inventory Overstating inventory means that the reported amount for the cost of a company’s inventory is greater than the actual true cost based...
A statistical tool that uses the least-squares method to estimate the fixed and variable components of mixed costs.
A sole proprietorship, partnership, or corporation organized for the purpose of earning profits and enhancing the financial position of the owners.
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
An asset account used to record amounts given to an employee with the expectation of repayment. For example, if an employee is given money by a company and the money is expected to be repaid or spent for company...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
See functional and natural matrix.
The borrower who provides to a lender an asset as collateral for a loan.
One of the types of donor-imposed temporary restrictions. An example of a purpose restriction is a cash donation with a donor-imposed requirement that the money be used only to purchase a vehicle for one of its programs....
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
A graph’s horizontal base which indicates the total number of units or other units of volume or activity for the amounts indicated by the y-axis.
Manufacturing costs other than direct materials and direct labor. To learn more about manufacturing overhead, see our Manufacturing Overhead Outline.
See equivalent units of production.
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
Additions or changes to a rented building that are made by the tenant rather than by the landlord. The tenant will record the cost of these changes in the long term asset account Leasehold Improvements. The cost of these...
of an interest payment of $500 and a principal payment of $1,500. The company’s entry to record the loan payment will be: Debit of $500 to Interest Expense Debit of $1,500 to Loans Payable Credit of $2,000 to Cash The...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
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...
A major repair such as an engine overhaul, which will extend the useful life of the asset. The amount should be recorded in the asset account and then depreciated over the remaining life of the asset.
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
See inventory: work-in-process (WIP).
See internal rate of return.
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
See cost-volume-profit (CVP).
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
A corporation’s own stock that has been repurchased from stockholders. Also a stockholders’ equity account that usually reports the cost of the stock that has been repurchased.
A shortened version of the term bank reconciliation or bank statement reconciliation.
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