A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
Also referred to as footnotes. These provide additional information pertaining to a company’s operations and financial position and are considered to be an integral part of the financial statements. The notes are...
The date that determines which stockholders are entitled to receive a corporation’s declared dividend. No accounting entry is made on this date.
Individuals elected by the common stockholders of a corporation to represent the stockholders and to establish the policies of the corporation. The board of directors appoints the officers of the corporation and declares...
See sales.
The result of subtracting total liabilities from total assets. It is also the term used by not-for-profit organizations instead of owner’s equity or stockholders’ equity. To learn more see our Explanation of...
The paid-in (or contributed) capital account that is credited $100 for each share of $100 par preferred stock that is issued. If the proceeds from the issuance or sale of one of the shares is greater than $100, the...
The statements, standards, interpretations and other financial reporting guidelines issued by the Financial Accounting Standards Board. The FASB pronouncements are available at www.FASB.org.
A general ledger account which serves to summarize similar transactions. For example, all of the closing entries involving operating expenses might be posted to an operating expense clearing (or summary) account.
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
See income statement. To learn more, see Explanation of Income Statement.
The bank account on which checks are written or drawn. A bank refers to checking accounts as demand deposits.
A bond with collateral.
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
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 miscellaneous expense account used to record the difference between the amount of cash needed to replenish a petty cash fund and the amount of petty cash receipts at the time the petty cash fund is replenished.
An official pronouncement by the Financial Accounting Standards Board that involves a previously issued FASB Standard. FASB Interpretations are part of the generally accepted accounting principles.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
Bonds and other debt securities that a company intends to hold until the securities mature. In addition to intent, the company must have the financial ability to be able to hold them until they mature.
See direct labor efficiency variance and variable manufacturing overhead efficiency variance.
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
A financial ratio that compares a company’s interest expense to the company’s income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the...
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
See interest revenues.
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
The point at which several products emerge from a common process.
See purchase order.
Revenue that has been earned but not yet invoiced to the customer.
See prepaid dues.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
Life insurance without a cash value.
See U.S. Treasury bills.
The repurchase of bonds by the issuer of the bonds.
Sales before deducting sales returns, sales allowances, and sales discounts.
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
Manufactured products that are often expressed in units, machine hours, etc.
See inventory: work-in-process (WIP).
Featured Review
"When I began to cut my teeth as a new general ledger accountant, I discovered that my memory of a lot of the accounting that I learned in college was getting slightly hazy. So, I combed the internet for websites that could help refresh that hazy memory of accounting principles. When I stumbled upon AccountingCoach by Harold Averkamp, CPA, MBA, my search ended. AccountingCoach helped me straighten out the bits and pieces of accounting that were beginning to elude me or that hadn't quite fallen into place. It didn't take long for me to realize that I wanted, and needed, the peace of mind of having complete access to the concise and easy-to-understand lessons. I became a PRO user over fifteen years ago, and I have always been glad I did. Thank you, AccountingCoach, for many years of being my number-one accounting research website!" - K.W.
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: