What is the difference between inventory and the cost of goods sold? Definition of Inventory Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. A...
What is the difference between inventory and the cost of goods sold? Definition of Inventory Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. A...
The amount of principal owed on a loan. On the typical mortgage loan, a portion of the monthly payment is applied to interest and principal. The amount of principal that remains after the principal payment is the unpaid...
The supplier of goods or services.
A phrase that indicates a transaction was between two independent parties and that the resulting amount is a fair representation of the value.
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
Under the accrual method of accounting, this account reports the amount of wages that the delivery employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
A method of payment used in place of a paper check.
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
See pass-through contributions.
Where do worker compensation insurance costs get reported on the financial statements? Worker compensation insurance costs (also referred to as worker comp) should appear on the income statement and also on the balance...
Where are short-term bank loans reported on the statement of cash flows? Definition of Short-Term Bank Loans Short-term bank loans are generally loans that must be repaid within one year of the date of the balance sheet....
What are the limitations of the balance sheet? Definition of Balance Sheet The balance sheet is one of the main required financial statements. It is also known as the statement of financial position. The balance sheet...
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
Analyzing financial statements by using financial ratios, horizontal analysis, and vertical analysis. To learn more, see Explanation of Financial Ratios.
One of the financial statements issued by a nonprofit organization which reports expenses according to both function and nature. Learn more about Nonprofit Accounting.
A major classification on the balance sheet. It is the second long term asset section after current assets. Included are land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks,...
See variable manufacturing overhead efficiency variance.
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
Beginning in 2018, this is one of two classifications of net assets reported on the financial statements of a not-for-profit organization’s financial statements. This classification replaces the previous...
See current portion of long-term debt.
See direct labor efficiency variance.
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
Contributions collected by Charity #1 who is merely acting as a collection agent for Charity #2. Also known as flow-through contributions.
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
The third major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The systematic allocation of the costs incurred to issue bonds (reported in a contra liability account) to Interest Expense over the life of the bonds.
Retained earnings not available for dividends.
A variance arising in a standard costing system that indicates the difference between the actual amount of fixed manufacturing overhead incurred and the budgeted amount of fixed manufacturing overhead. To learn more, see...
The discounted value of a series of equal amounts occurring at future points with equal time intervals.
This current liability account reports the amount a company’s employees have earned in holiday pay, vacation pay, and sick days but have not yet taken as of the date of the balance sheet.
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
Financial statements that bear the report of independent auditors attesting to the financial statements’ fairness and compliance with generally accepted accounting principles.
The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
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