An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
The products in a manufacturer’s inventory that are completed and are awaiting to be sold. You might view this account as containing the cost of the products in the finished goods warehouse. A manufacturer must...
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
The result of the sale of an asset for less than its carrying amount; the write-down of assets; the net result of expenses exceeding revenues.
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
See yield to maturity.
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
This term is used in place of retained earnings when the balance in the retained earnings account is negative (a debit balance).
A term meaning behind, such as dividends in arrears, or something occurring at the end of a period, such as the recurring payment in an annuity in arrears.
See current asset.
A term often used when referring to office workers, managers, professionals, and executives. These employees’ pay is often stated as a salary for a month (and not as an hourly pay rate).
Bonds with one maturity date (as opposed to serial bond).
In accounting this is the rate used to discount future cash flows in order to determine their present value.
To receive money in exchange for a promise to repay the amount to the lender.
A major classification on the balance sheet. It is the second long term asset section after current assets. Included are land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks,...
Financial statements (such as the income statement and balance sheet) that summarize much of the detail into a few major lines of information.
A stockholders’ equity account with a credit balance. The credit balance results when a corporation sells some of its treasury stock for an amount that exceeds the corporation’s cost of the treasury stock...
An employee fringe benefit provided by an employer that allows employees to be paid for a limited number of days per year when the employees are ill.
To record accounting entries into a journal.
Financial statements based upon various assumptions.
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
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.
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
A mathematical tool to optimize profits (contribution margin) given a limited amount of inputs and other constraints.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
Also referred to as operating expenses. These expenses are reported in the period in which they were incurred, not the period in which they were paid.
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
See net operating income (NOI).
The cost of the next unit.
See accelerated depreciation.
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