The relationship between two variables. There can be correlation without a cause-and-effect relationship. Also see coefficient of correlation.
The relationship between two variables. There can be correlation without a cause-and-effect relationship. Also see coefficient of correlation.
Scrap or waste that should have been avoided. In other words, abnormal spoilage is the amount that is over and above the normal amount that is expected in a production process.
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
See carrying amount.
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
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.
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
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...
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed...
The entry made in a journal. It will contain the date, the account name and amount to be debited, and the account name and amount to be credited. Each journal entry must have the dollars of debits equal to the dollars of...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
See managerial accounting.
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...
The amount before deductions. For example, gross pay is the amount before withholding deductions. Gross sales is the amount before sales returns and allowances and sales discounts.
A reduction in the original selling price.
See next-in, first-out cost flow assumption (NIFO).
The revenue from the next unit.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
The collection of money (currency, coins, checks). Not to be confused with revenues.
The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
Errors made by the bank on a company’s bank account. These are usually infrequent but could include an incorrect amount of a check or deposit or a check or deposit recorded in the wrong account.
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favorable variance occurs when the actual revenues are greater than the budgeted...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
See earnings per share.
See not sufficient funds check.
A stock split, such as a 2-for-1, means that every stockholder will have twice as many shares as was held previously. Accordingly, the market price per share after the split should be one-half of the market price...
See unrelated business income tax.
An asset account in a bank’s general ledger that indicates the amounts owed by borrowers to the bank as of a given date.
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
Savings accounts and certificates of deposits at a bank.
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