A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
The length of time that an asset would last. Instead of the physical life, accountants focus on the useful life. For example, a computer’s physical life is perhaps 50 years. However, its useful life is likely to be...
See bond issue costs.
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...
Includes the main financial statements (income statement, balance sheet, statement of cash flows, statement of retained earnings, statement of stockholders’ equity) plus other financial information such as annual...
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
See straight-line method of depreciation.
A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
The paid-in (or contributed) capital account that is credited $100 for each share of $100 par preferred stock that is issued. If the proceeds from the issuance or sale of one of the shares is greater than $100, the...
A bond with collateral.
A liability account containing the amount of premium on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
The party receiving goods to be sold. See consigned goods.
The ability to generate cash.
A dividend paid in assets other than cash.
The abbreviation for the accounting and bookkeeping term debit.
See perpetual system of inventory.
Often a liability representing the differences between the income tax expense associated with the revenues and expenses reported on a corporation’s income statements and the actual income tax appearing on the...
See credit memo.
The Certified Management Accountant (CMA) Exam is a 13-hour, four-part exam on business analysis, management accounting and reporting, strategic management, and business application. The exam is administered through IMA,...
See inventory: finished goods (FG).
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
The generally accepted accounting principles practiced in the United States.
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
A detailed plan with dollar amounts. Examples of budgets used in business include the cash budget, sales budget, production budget, department budgets, the master budget, and the capital expenditures budget. Some budgets...
Usually the difference between the cost of inventory at LIFO versus the cost of inventory at FIFO.
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
End of month.
Sorting and reporting expenses according to the type of activity for which the expense was incurred. The functional expense classifications for a nonprofit organization would be Program #1, Program #2, Management and...
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
To receive money in exchange for a promise to repay the amount to the lender.
The acronym for cost of sales or for the cost of services.
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
See phantom profits.
This term is often associated with an investment in the common stock (and/or preferred stock) of a corporation when the stock is publicly traded.
See Explanation of Inventory and Cost of Goods Sold.
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.
A variance arising in a standard costing system that indicates the difference between 1) the standard cost of the direct labor that should have been used (the standard hours times the standard rate) for the good output,...
See chief operating officer.
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