The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
See accelerated depreciation.
Includes the main financial statements (income statement, balance sheet, statement of cash flows, statement of retained earnings, statement of stockholders’ equity) plus other financial information such as annual...
Officers of a corporation are appointed by the board of directors to execute the policies that have been established by the board of directors. The officers include the chief executive officer (CEO), the chief operations...
A detailed plan with dollar amounts. Examples of budgets used in business include the cash budget, sales budget, production budget, department budgets, the master budget, and the capital expenditures budget. Some budgets...
The borrower who provides to a lender an asset as collateral for a loan.
Assets = Liabilities + Owner’s Equity. For a corporation the equation is Assets = Liabilities + Stockholders’ Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets....
The symbol that represents the total cost in the equation of the cost line y = a + bx.
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
Usually used in describing fixed costs. We often state that fixed costs will not change as volume changes. However, if volume were to triple, there would likely be more fixed costs as the company will need more space and...
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
Receivables other than Accounts Receivable. Examples include amounts due from employees and income tax refunds receivable.
The chief accounting officer of a company. This person would head up the accounting department.
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
A company’s loss before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
Point of purchase.
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
The lender (bank) that receives an asset as collateral for a loan.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
Goods or services provided instead of money.
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...
The compensation usually associated with executives, managers, professionals, office employees, etc. whose pay is stated on an annual or on a monthly basis. (On the other hand, “wages” is usually associated...
A decentralized division of a corporation which is responsible for and has control over its costs, revenues, and investments.
See Explanation of Inventory and Cost of Goods Sold.
The difference between the call price of a bond or preferred stock and its stated or par value.
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
The accounting or bookkeeping system that does not utilize computer software for entering transactions into journals and ledgers.
Pushing authority and decision making down to the managers and employees who are closer to the work.
The present fair market value.
Past omitted dividends on cumulative preferred stock. Generally these omitted dividends were not declared and, therefore, do not appear on the corporation’s balance sheet as a liability. However, they must be...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
A record of the details to support a general ledger account. The general ledger account is often referred to as the control account. For example, the accounts receivable subsidiary ledger provides the details to support...
A driver of a change in the amount of a dependent variable. The independent variable is usually represented by “x”, the dependent variable by “y”, the rate of change by “b”, and the...
See accrual-type adjusting entry.
A current asset account which contains the amount of investments that can and will be sold in the near future.
The leading accounting and bookkeeping software for small businesses in the United States. QuickBooks is the registered trademark of Intuit Inc.
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
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