cash flows are presented in one of three classifications: Operating activities Investing activities Financing activities The cash flow statement has been required by the Financial Accounting Standards Board (FASB) since...
cash flows are presented in one of three classifications: Operating activities Investing activities Financing activities The cash flow statement has been required by the Financial Accounting Standards Board (FASB) since...
See inventory: work-in-process (WIP).
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
A current asset account that represents an amount of cash for making small disbursements for postage due, supplies, etc.
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’ equity section of the balance sheet, the cash that was generated from those retained earnings is not likely be in the company’s checking account. Instead, the corporation likely used the cash to acquire additional...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
The amount of wages and related expenses that have been incurred by the employer (and earned by the employees) but have not yet been paid.
A liability account that reports the amount payable as of the balance sheet date. For the account to show a balance, a loss/obligation must be probable and the amount can be estimated. If the lawsuit is remote or only...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
. Definition of Expenditure An expenditure is a payment or disbursement. The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be payment in the same...
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.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
What is turnover? Definition of Turnover In accounting, the term turnover can have more than one meaning. In some countries turnover is used in place of sales. Turnover also pertains to certain financial ratios that...
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...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
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...
The Roman numerals that indicate 1,000,000.
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
The combination of a manufacturer’s direct labor and factory overhead.
What is net? In accounting, net usually refers to the combination of positive and negative amounts. For example, the amount of net sales is the combination of the amount of gross sales (a positive amount) and some...
ledger accounts. At any point you can go to an account such as Salaries Expense for Sales Staff and see the year to date amount of such an expense. With the use of accounting software, an enormous quantity of...
A weighted average cost used with the periodic inventory system. To learn more, see Explanation of Inventory and Cost of Goods Sold.
of operating income is shown. As a result, the income statement allows for an easy comparison of the operations and profitability of companies regardless of their debt and interest expense. Join PRO to Track Progress...
Can I capitalize this year's R&D? Generally, R&D costs cannot be capitalized for U.S. financial statements according to the Statement of Financial Accounting Standards No. 2, Accounting for Research and...
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
See endowment fund.
The British term for controller.
The chief accounting officer of a company. This person would head up the accounting department.
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
The indirect manufacturing costs actually incurred during an accounting period.
Sending work to another organization instead of processing the work in-house. Often payroll is outsourced to a company that specializes in payroll processing.
The term used by manufacturers to indicate that the manufacturing overhead applied or assigned to its production is greater than the amount actually incurred.
at a premium. Any discount or premium on the bonds is recorded in a separate account. Another account is used to record the bond issue costs such as legal fees, auditing fees, registration fees, etc. These bond-related...
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