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...
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...
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
The cash amounts received after deducting the related income taxes and also the cash amounts paid after deducting the cash saved when the amounts are income tax deductible.
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...
See Explanation of Bank Reconciliation.
The issued shares of common stock minus the shares of treasury stock. The weighted average of the outstanding shares is used to compute the earnings per share.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
The amount by which the proceeds from the sale of land exceeded the carrying amount of the land sold. It is reported as a non-operating or “other” item on a multiple-step income statement.
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...
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...
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...
See cost of goods sold.
See sum of the years’ digits method of depreciation.
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
The top ranking financial person in the corporation.
The inventory system where purchases are debited to the inventory account and the inventory account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in the inventory account is...
The amount by which the proceeds from the sale of investments exceeded the carrying amount of the investments that were sold. It is reported as a non-operating or “other” item on a multiple-step income...
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
See current portion of long-term debt.
Officers of a corporation are appointed by the board of directors to execute the policies that have been established by the board of directors. The officers include the chief executive officer (CEO), the chief operations...
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....
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,...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
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...
Multiplying the individual items contained in each bill of material times the number of units expected to be produced during a specified time period. The result is the total quantity of each input that will be needed for...
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...
For a merchandiser this is the cost of merchandise purchased after deducting purchase returns, purchase allowances, and purchase discounts but after adding freight-in.
The point at which several products emerge from a common process.
What is the expanded accounting equation? Definition of Expanded Accounting Equation The expanded accounting equation provides more details for the owner’s equity amount shown in the basic accounting equation. The...
What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
What is operating income? Definition of Operating Income Operating income is defined as a corporation’s operating revenues minus its operating expenses. Operating income will be shown as a subtotal on many...
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
What is a controller's cushion? A controller’s cushion or controller’s reserve involves temporarily recording too much expense for an item that the controller calculates. For example, the controller might budget...
What is contained on a 10-column worksheet? The 10-column worksheet that I am familiar with will have the general ledger account titles in the first column followed by ten columns of amounts. There will be one debit and...
What adjustment is needed when a check that was written in a previous month appears on the current month's bank statement? A check written in any previous month but not appearing on previous bank statements, should have...
What does it mean to check the extensions and to foot an invoice? To check the extensions on a purchase invoice means to verify that the number of units of each item multiplied by its unit cost agrees with the total...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
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