The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
The difference between the call price of a bond or preferred stock and its stated or par value.
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
See Explanation of Inventory and Cost of Goods Sold.
A bond with collateral.
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
See endowment fund.
See certified public accountant.
Cash that can be used only for the purpose intended.
The British term for controller.
The chief accounting officer of a company. This person would head up the accounting department.
The borrower who provides to a lender an asset as collateral for a loan.
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
A liability account on the books of a company receiving cash in advance of delivering goods or services to the customer. The entry on the books of the company at the time the money is received in advance is a debit to...
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The owner of property that often receives rent from tenants.
See rolling budget.
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
This activity, which involves playing the float, is sometimes used when a company is facing an overdrawn checking account. Assume that a company has a checking account at NY Bank that is about to overdraw. To prevent the...
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
Under the accrual basis of accounting, the Interest Revenues account reports the interest earned by a company during the time period indicated in the heading of the income statement. Interest Revenues account includes...
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
A term to mean the company’s general ledger or accounting records.
A term used to describe checks written by a company that have been received and paid by the bank on which they were drawn or written. The check number and amount will appear on the company’s checking account...
A dividend paid in assets other than cash.
See income statement. To learn more, see Explanation of Income Statement.
The internal growth of a company’s existing businesses. Organic growth excludes the additional sales resulting from acquiring another company.
The party receiving goods to be sold. See consigned goods.
See perpetual system of inventory.
The relationship between two variables. There can be correlation without a cause-and-effect relationship. Also see coefficient of correlation.
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
See premium on bonds payable.
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
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