A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is...
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
The situation where manufacturing service departments provide service to each other. For example, the factory maintenance department provides services to the factory administrative department and the factory...
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
A long-term asset which indicates the cost of the constructed improvements to land, such as driveways, walkways, lighting, and parking lots. Land Improvements will be depreciated over their useful life by debiting the...
See notes to financial statements.
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include: Allowance for Doubtful Accounts Discount on Bonds Payable Bond Issue Costs Owner’s...
See return on investment (ROI).
Inventory that is less than the expected amount. It might be associated with theft or damage.
What is the difference between Social Security and Medicare payroll taxes? Social Security Payroll Tax The Social Security payroll tax is 6.2% and is based on each employee’s earnings (wages, salaries, bonuses,...
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
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.
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
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.)
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
The current liability account which reports the amount of salaries earned by a company’s employees, but which have not yet been paid by the company.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
Future amounts that have been discounted to the present.
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
In financial accounting this term often refers to the accounting guidelines or principles of conservatism and materiality.
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
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,...
A lender or supplier who is owed money but does not have a lien on any of the assets of the company that owes the money. If the company that owes the money is liquidated, the unsecured lender receives money only after...
Usually used in describing fixed costs. We often state that fixed costs will not change as volume changes. However, if volume were to triple, there would likely be more fixed costs as the company will need more space and...
A term that refers to a negative checking account balance. It arises when a company writes checks in excess of the amount it has on deposit in its checking account.
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
Additions or changes to a rented building that are made by the tenant rather than by the landlord. The tenant will record the cost of these changes in the long term asset account Leasehold Improvements. The cost of these...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
Point of purchase.
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
See debenture bond.
See accrued rent expense. Also see accrued rent income.
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