See program evaluation and review technique (PERT).
See program evaluation and review technique (PERT).
See full disclosure principle.
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
The acronym for original equipment manufacturer.
See internal rate of return.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
Regular fees or charges often paid to an organization at regular intervals. For example, a state CPA organization might have annual dues of $200.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
Billing a client based on the value of the information or service provided rather than billing based on time spent.
To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
Also referred to as a sunk cost. A past cost is not relevant to a decision.
The expenses directly incurred by a nonprofit organization in providing one of its programs.
See not sufficient funds (NSF) check.
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
The generally accepted accounting principles practiced in the United States.
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
Also known as freight-out or as delivery expense. This is an operating expense further classified as a selling expense. It results when merchandise is sold with terms of FOB destination.
The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at...
Used in conjunction with cost or expense behavior. Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s...
See generally accepted accounting principles (GAAP).
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
A heading that includes common stock and preferred stock.
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
See sales discounts.
Amounts spent for property, plant and equipment.
A report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
National Association of Accountants. This organization’s name was changed to Institute of Management Accountants and currently is referred to as IMA.
Operations of an entire division, subsidiary, or segment of a company where a formal plan exists to eliminate it from the company. (It involves more than pruning a product line of certain models of products.) The...
An average that changes with an additional purchase. See perpetual moving average in Explanation of Inventory and Cost of Goods Sold.
What is the difference between product costs and period costs? A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is...
The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
See bill of materials.
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
See mixed expenses.
A person who is considered to be both the employer and the employee. For example, the sole owner of a sole proprietorship is self-employed.
Merchandise that has been shipped by a supplier but the merchandise has not yet reached the customer’s location. Goods in transit that were shipped FOB Shipping Point should be included in the customer’s...
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