Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
See straight-line method of depreciation.
A loss that occurs by holding an asset. Holding losses might be recorded on the income statement or they might not be recorded depending on the asset and the amounts.
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
Often a 1% or 2% reduction in the amount owed if an invoice is paid within 10 days of the invoice date instead of the customary 30 days.
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
On credit; not for cash.
Retailers’ normal operating activities would include the purchase and sale of merchandise and selling and administrative expenses. A retailer’s investing of its idle cash is a nonoperating activity. However,...
A contra liability account containing the amount of discount on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
See endowment fund.
See yield to maturity.
The chief accounting officer of a company. This person would head up the accounting department.
Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for...
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity in advance. An example would be the monthly rent on an apartment.
See direct materials usage variance.
The British term for controller.
The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
See our Break-even Point Outline.
The sales invoice or bill issued by a vendor and received by the buyer. The customer will also refer to the supplier invoice as the vendor invoice.
A mathematical technique that determines the best-fitting line through a series of points. This is used in regression analysis.
See units of production method of depreciation.
See equivalent units of production.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
Usually means to scrap a long-term plant asset and receive no proceeds from its disposal.
See Public Company Accounting Oversight Board (PCAOB).
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 sum of future amounts multiplied by their respective probabilities of occurrence.
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
What is miscellaneous expense? Definition of Miscellaneous Expense In accounting, miscellaneous expense may refer to a general ledger account in which small, infrequent transaction amounts are recorded. The account...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
See outstanding checks.
An invoice or other document received from a vendor, supplier, etc. usually for goods or services received. Also a verb to indicate that a customer’s sales invoice should be prepared for goods or services.
A classification on a single-step income statement for both operating and nonoperating expenses and losses that pertain to the time interval shown in the heading of the income statement.
Another company that supplies goods or performs services. Also known as a vendor.
The optimum purchase (or production) quantity which minimizes the combined total cost of carrying inventory and processing additional purchase orders (or production setups).
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
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