Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
The total of interest and principal payments required to be paid on loans payable.
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
See mixed expenses.
Federal Unemployment Tax Act. See federal unemployment tax.
A statistical tool that uses the least-squares method to estimate the fixed and variable components of mixed costs.
One hundredth (1/100) of a percentage point. In other words, one percentage point is equal to 100 basis points. The difference between an interest rate of 6.5% and 6.75% is 25 basis points.
The additional amount given to employees for the overtime hours. Usually this is the “half-time” in time and one-half. For example, if an employee’s hourly pay rate is $10 per hour and the employee...
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings, profits). The...
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...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
A reduction in the original selling price.
See certificate of deposit.
The party receiving goods to be sold. See consigned goods.
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
See economic order quantity (EOQ) model.
Spoilage or waste that is likely to occur and cannot be avoided at a reasonable cost.
An amount that should be charged to the current accounting period as an expense.
Sometimes used as a heading in place of paid-in capital.
What is GAAP? Definition of GAAP GAAP is the acronym for generally accepted accounting principles. GAAP consists of the following: Basic underlying accounting principles, assumptions, and concepts such as the cost...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
A bill issued by a seller of merchandise or by the provider of services. The seller refers to the invoice as a sales invoice and the buyer refers to the same invoice as a vendor invoice.
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 compensation usually associated with executives, managers, professionals, office employees, etc. whose pay is stated on an annual or on a monthly basis. (On the other hand, “wages” is usually associated...
The activities provided by a nonprofit in carrying out one of its major programs.
The party owning an asset and receiving rent from another party (the lessee).
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
A cost and/or volume of activity that is outside of an expected range.
See U.S. Treasury bills.
See functional expense classification.
An estimate of an asset’s market value
Often a U-shaped arrangement of the various machines involved in manufacturing a product. This layout eliminates the need to move the item being manufactured from one area or department of the factory to another. In...
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