See next-in, first-out cost flow assumption (NIFO).
See next-in, first-out cost flow assumption (NIFO).
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 functional and natural matrix.
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
A reference to stockholders’ equity. See paid-in capital. Also an adjective that references property, plant and equipment used in a business; for example, capital expenditures and capital budgeting.
What is book value? Definition of Book Value In accounting, book value refers to the amounts contained in the company’s general ledger accounts (or books). It is important to realize that the book value is not the same...
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
Usually means every two weeks. For example, if an employee is paid every other Thursday, the employee is paid biweekly. The person paid biweekly will receive 26 paychecks per year. (People paid two times per month...
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 entity as a whole.
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 Explanation of Standard Costing.
A phrase used to communicate the total compensation of a salaried employee. Fringe benefits (health insurance, vacation days, sick days, employer matching of Social Security and Medicare taxes, pension or 401-k...
A budget that flexes with volume. Under a flexible budget the budgeted amount of manufacturing overhead will increase if the company produces more units than planned. The flexible budget will decrease if the company...
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
Also referred to as a “p.o.” A multi-copy form prepared by the company that is ordering goods. The form will specify the items being ordered, the quantity, price, and terms. One copy is sent to the vendor...
The lender (bank) that receives an asset as collateral for a loan.
Goods or services provided instead of money.
An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
See time period assumption.
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...
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
What is a compilation? Definition of Compilation A compilation refers to a company’s financial statements that have been prepared or compiled by an outside accountant. A compilation is usually part of an accounting...
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
What is gross pay? Definition of Gross Pay Gross pay is the amount an employee is paid before the employer withholds FICA (Social Security and Medicare payroll taxes), income taxes (federal, state, local) if applicable,...
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
Merchandise that was returned to the seller by a customer. This account is a contra sales account. When merchandise sold on credit is returned, this account is debited and Accounts Receivable is credited.
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
See discount on bonds payable.
See freight-in.
This term is used in several ways. Some use the word interchangeably with revenues. Others use the word to signify a net amount, such as income from operations (revenues minus expenses in the company’s main...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
The amount at which the holder of preferred stock or bonds must sell the stock or bonds back to the issuing corporation. The call price is disclosed in the indenture. The call price might be the face or par amount plus...
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