The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
See deferred expense.
See not sufficient funds (NSF) check.
The Roman numerals that indicate 1,000,000.
A qualitative characteristic in accounting. It is achieved when information is verifiable, objective (not subjective) and you can depend on it.
A “clean” auditor’s report. That is, the auditor has concluded that the financial statements present fairly the results of the company’s operations and its financial position according to...
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
A division or department of a business whose managers are responsible for both revenues and expenses.
of an Expense As a prepaid cost such as the $6,000 in the asset account Prepaid Insurance expires, the part that expires will be reported on the income statement as Insurance Expense. If the insurance cost is expiring...
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
The abbreviation of the accounting and bookkeeping term credit.
See compound interest.
Sending work to another organization instead of processing the work in-house. Often payroll is outsourced to a company that specializes in payroll processing.
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...
See production service department.
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
See first in, first out (FIFO).
A lien on real estate to protect a lender. The loan made with such security is referred to as a mortgage loan.
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
See return on capital employed.
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
See bond sinking fund.
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
The par value of common and preferred stock.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
Statement of Cash Flows. See Explanation of Cash Flow Statement.
The situation where the number of units sold is not influenced by a change in selling price. In other words, a price increase does not have a corresponding decrease in the number of units sold.
Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine...
Another name for check.
A journal entry made on the first day of a new accounting period to undo the accrual type adjusting entries made prior to the preparation of the financial statements dated one day earlier. Reversing entries allow for an...
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...
See bill of materials.
National Association of Accountants. This organization’s name was changed to Institute of Management Accountants and currently is referred to as IMA.
Also known as a CD. A bank time deposit (savings deposit) that cannot be withdrawn until a specified date. For example, a CD might mature in 6, 9, 12, or 18 months. If the amount deposited in a CD needs to be withdrawn...
To record accounting entries into a journal.
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
A stakeholder is anyone that has an interest or is affected by a decision. For example, some of the stakeholders of a state university include the students, students’ families, alumni, professors, custodians,...
See unrelated business income tax.
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