Manufacturing overhead assigned to units of output. Often this is applied via a standard overhead rate. See the Explanation of Standard Costing.
Manufacturing overhead assigned to units of output. Often this is applied via a standard overhead rate. See the Explanation of Standard Costing.
A situation where there is correlation between the independent variables used in explaining the change in a dependent variable. When this condition exists, you cannot have confidence in the individual coefficients of the...
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
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...
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
A bond (long-term debt) that is secured by a lien on real estate.
The combination of direct materials and direct labor.
This account shows the amount of delivery expense incurred (occurring) during the accounting period shown in the heading of the income statement. The title of this account could also be Freight Out or Transportation...
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...
The term used by manufacturers to indicate that the manufacturing overhead applied or assigned to its production is greater than the amount actually incurred.
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
See separation of duties.
A right to buy a specific number of shares of stock at a specific price by a specific date.
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.
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
See accrued payroll.
A shortened version of the term bank reconciliation or bank statement reconciliation.
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...
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
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...
The abbreviation of the accounting and bookkeeping term credit.
Point of sale.
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
The amount of vacation that an employee has earned but has not yet taken.
See direct costing.
The term associated with payroll deductions from an employee’s gross wages or gross salary.
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
The amount of wages and related expenses that have been incurred by the employer (and earned by the employees) but have not yet been paid.
A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.
See premium on bonds payable.
The chief accounting officer of a company. This person would head up the accounting department.
Net sales is the gross amount of Sales minus Sales Returns and Allowances, and Sales Discounts for the time interval indicated on the income statement.
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
See International Accounting Standards Board (IASB).
See notes to financial statements.
A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant...
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
To learn more, see Explanation of Depreciation.
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