This is granted by banks only to very creditworthy customers. It states that the bank will guarantee amounts that its customer incurred when purchasing goods. A letter of credit might be necessary for a U.S. company...
This is granted by banks only to very creditworthy customers. It states that the bank will guarantee amounts that its customer incurred when purchasing goods. A letter of credit might be necessary for a U.S. company...
See compound interest.
A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the...
See cost of goods sold.
A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.
A document filed when a corporation is formed. Among other things, it lists the number of shares of stock that the corporation is authorized to issue.
Usually refers to one of the accounts receivable that was deemed to be uncollectible or worthless and was removed from the general ledger account Accounts Receivable.
These agencies establish the educational requirements and the eligibility of candidates desiring to sit for the Uniform CPA Exam. There is a board of accountancy in each of the 50 U.S. states plus five other...
A term used in break-even analysis to indicate the amount of sales that are above the break-even point. In other words, the margin of safety is the amount by which a company’s sales could decrease before the...
See separation of duties.
A long-term asset account reported on the balance sheet under the heading of property, plant, and equipment. Included in this account would be copiers, computers, printers, fax machines, etc.
The cost to operate office equipment during a specified time interval.
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
In regression analysis this is a statistic designated as r and ranging from -1 to +1. It indicates the percentage of correlation between the dependent variable and the independent variable(s). When this statistic is...
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
The amount that a bank commits to lend a borrower during a specified purpose.
The amount of office supplies used during a specified time interval.
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
Usually means to scrap a long-term plant asset and receive no proceeds from its disposal.
The point at which several products emerge from a common process.
See income statement. To learn more, see Explanation of Income Statement.
Also known as a CD. A bank time deposit (savings deposit) that cannot be withdrawn until a specified date. For example, a CD might mature in 6, 9, 12, or 18 months. If the amount deposited in a CD needs to be withdrawn...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
One of the steps in effective internal control. An example of separation of duties is to have the money handling be performed by someone who does not update the records. This means that the money counters at a church...
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
See income statement. To learn more, see Explanation of Income Statement.
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...
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
In regression analysis this is a statistic (designated as r-squared) indicating the percentage of the change occurring in the dependent variable that is explained by the change in the independent variable(s). The percent...
Financial Statements Video Training Part 14 Statement of cash flows: free cash flow; statement of owner's equity Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current...
How much of the contribution margin is profit on units sold in excess of the break-even point? After the break-even point is reached, the entire contribution margin on the next units sold will be profit…provided the...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
See accrual basis of accounting.
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
The financial statements of nonprofits include the statement of financial position, the statement of activities, the statement of cash flows, notes to the financial statements, and the statement of functional expenses....
See weighted-average cost flow assumption and moving-average cost of inventory.
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...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
A term used in cost accounting to arrive at the cost per unit. The term is associated with the units that are not completed at the end of an accounting period. For example, if 500 units are completed as far as materials,...
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