A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
A sorting of a company’s accounts receivables by the age of the receivables.
The system where the general ledger account Inventory is not updated during the year. Rather, the merchandise purchased is recorded in temporary purchases accounts. At the time a balance sheet is presented, the inventory...
The rate that will discount all cash flows to a net present value of zero.
The financial statements of nonprofits include the statement of financial position, the statement of activities, the statement of cash flows, notes to the financial statements, and the statement of functional expenses....
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
Within a reasonable range of activity, the slope of the cost line is the variable rate, which is often denoted as ‘b’ in the straight line y = a + bx.
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
The top ranking financial person in the corporation.
See cash basis of accounting.
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
The repurchase of bonds by the issuer of the bonds.
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
Inventory and Cost of Goods Sold For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided....
The systematic allocation of the costs incurred to issue bonds (reported in a contra liability account) to Interest Expense over the life of the bonds.
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
The discounted value of a series of equal amounts occurring at the beginning of each equal time interval.
This organization has changed its name to Institute of Management Accountants. It is currently using the name IMA to reflect the many backgrounds of its membership.
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
A stated legal amount for each share of preferred stock. The par value for every share of preferred stock issued must be recorded in the separate stockholders’ equity account Preferred Stock.
See exchange of similar nonmonetary assets.
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
See Explanation of Inventory and Cost of Goods Sold.
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
A table of factors that shows what the future value of $1 will grow to if invested at the rate shown in the column heading and compounded for the number of periods indicated in the row.
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
The discounted value of a series of equal amounts occurring at future points with equal time intervals.
The title of the official pronouncement of the Financial Accounting Standards Board which establishes a new accounting standard.
See Statement of Financial Accounting Standard No. 121. Under this standard if the undiscounted future cash flows from the asset (including sale amount) are less than its carrying amount, a loss is recognized. The amount...
A method for estimating the inventory of a retailer. This method requires that the retail amounts and the related cost amounts are available for beginning inventory and purchases. An illustration of this technique is...
A stated legal amount for each share of common stock. The par value for every share of common stock issued must be recorded in the separate stockholders’ equity account Common Stock.
Featured Review
"My background includes a hotel management degree, and I also have an accounting diploma. I became a PRO user as my mother tongue is Greek, but I needed to learn accounting terminology in English in order to work in the UK. AccountingCoach’s materials are very good, as they explain in plain language what every term means so as to be easily understood by anyone, whether or not they are in accounting. These materials have helped me to learn and understand the matching terms in English so I could get an AAT Level 3 Diploma. Thank you very much for all this useful information, which is updated frequently." - Angeliki A.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: