Assets such as Cash, Temporary Investments, and Accounts Receivable.
Assets such as Cash, Temporary Investments, and Accounts Receivable.
A term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
An asset account used to record a loan to another party that has real estate as collateral.
The exchange or trade-in of a long-term asset for a completely different long-term asset. For example, exchanging an antique car for land.
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
See stockholders’ equity.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
The net amount of revenues and gains minus expenses and losses for the current year for the sole proprietorship owned by R. Smith. After the financial statements are prepared for the year, this amount will be transferred...
A certified public accountant (CPA) who practices accounting in his or her own firm without another CPA as a partner or shareholder.
A balance sheet line to report short-term assets that are too insignificant to be identified separately.
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
These pronouncements were issued by the Committee on Accounting Procedures of the American Institute of Certified Public Accountants during the years 1953 to 1959. They were and are part of the generally accepted...
See inventory: work-in-process (WIP).
See Statement of Financial Accounting Standards.
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
Amount of depletion charged to expense on the income statement for the period indicated in its heading. The amount is also credited to the contra asset account Accumulated Depletion.
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
See accrual basis of accounting.
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
See Explanation of Standard Costing.
Under the accrual method of accounting, the account Salaries Expense: Delivery Dept reports the salaries that the employees in the delivery department have earned during the period indicated in the heading of the income...
The date a corporation pays a dividend to its shareholders. On this date the accounting entry will be a debit to Dividends Payable and a credit to Cash.
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
See perpetual system of inventory.
Present value.
Assigning manufacturing overhead costs to products being manufactured by using a manufacturing overhead rate.
The accounting guideline requiring amounts in the accounts and on the financial statements to be the actual cost rather than the current value. Accountants can show an amount less than cost due to conservatism, but...
In securities, a party that assists a company in issuing stock or bonds.
See managerial accounting.
The top ranking financial person in the corporation.
See absorption costing.
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...
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