See premium on bonds payable.
See premium on bonds payable.
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
Financial Executives Institute.
See consistency.
An estimate of an asset’s market value
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 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.
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
The revenue from the next unit.
See net operating income (NOI).
National Association of Accountants. This organization’s name was changed to Institute of Management Accountants and currently is referred to as IMA.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
Amounts spent for property, plant and equipment.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
Free on Board. See FOB destination and FOB shipping point.
See inventory: finished goods.
A special or specialized journal to record sales of merchandise to customers. In a manual system this saves a significant amount of recording time. In today’s computerized environment, sales are recorded...
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...
Sometimes used as a heading in place of paid-in capital.
A decentralized division of a corporation which is responsible for and has control over its costs, revenues, and investments.
Delivery expense to be paid by the seller when its merchandise is sold with terms of FOB destination. This is an operating expense and is not included in the cost of merchandise.
Usually a person without a four-year or five-year accounting degree employed to record routine financial transactions for smaller companies.
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
Revenue that has been earned but not yet invoiced to the customer.
An amount owed on bill or invoice from a vendor or supplier of goods or services.
An allocation based on some proportions. For example, a corporation’s taxable income that was earned in many of the U.S. states might be allocated or apportioned to the states in which the corporation has conducted...
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
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).
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
Usually a permanently restricted asset for which the principal portion must be retained indefinitely. The earnings from an endowment fund could be unrestricted or temporarily restricted.
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
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.
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