Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
A method of costing manufactured items that differs from normal costing and standard costing. Under actual costing each accounting period’s actual manufacturing overhead costs and each accounting period’s...
The statement of the Financial Accounting Standards Board with the title Accounting for Contributions Received and Contributions Made. This statement was originally issued in June 1993 and applies to both nonprofit...
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.
Financial Statements Video Training Part 12 Statement of cash flows: introduction, cash flows from operating activities Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
Net sales is the gross amount of Sales minus Sales Returns and Allowances, and Sales Discounts for the time interval indicated on the income statement.
An income statement account showing the amount of vacation expense earned by employees (by working) during the specified accounting period.
A method for estimating the inventory of a retailer. This method requires that the retail amounts and the related cost amounts are available for beginning inventory and purchases. An illustration of this technique is...
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
The person paying rent for using but not owning the asset.
Paper evidence of ownership in a corporation. The certificate would indicate the type of stock (common, preferred), any restrictions pertaining to the sale of the stock, the number of shares, the par value, etc. Today,...
See bond issue costs.
The time between when a check is written and when the check clears the bank account on which it is drawn.
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
The description of the required reporting of expenses by some nonprofits. The expenses will be presented on lines based on the nature of the expense (salaries, fringe benefits, rent, utilities, postage, professional...
See phantom profits.
An amount that should be charged to the current accounting period as an expense.
See payroll taxes payable.
The basic general rules upon which more detailed accounting standards are built. To learn more, see Explanation of Accounting Principles.
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
The owner’s equity accounts are the owner’s capital account and the owner’s drawing account. During the year the income statement accounts (revenues, expenses, gains, losses), the owner’s drawing...
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
Assigning more manufacturing overhead to production than the amount that was actually incurred.
A right to buy a specific number of shares of stock at a specific price by a specific date.
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
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 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.
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
The term used by manufacturers to indicate that the manufacturing overhead applied or assigned to its production is greater than the amount actually incurred.
Generally a long term liability account containing the face amount, par amount, or maturity amount of the bonds issued by a company that are outstanding as of the balance sheet date. To learn more about bonds payable,...
What is an accounting period? Definition of Accounting Period An accounting period is the period of time covered by a company’s financial statements. Common accounting periods for external financial statements include...
The sale, retirement, or exchange of property, plant and equipment.
A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must...
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
A corporation with a limited number of stockholders and whose stock is usually not publicly traded.
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
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