An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.
See certified public accountant.
A series of equal amounts occurring at the end of each equal time interval. Also known as an annuity in arrears. An example is the monthly payments on a loan. Another example is the semiannual interest on a bond.
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
See discounted cash flow model.
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
Under the accrual method of accounting, this account reports the employer’s expense for the company’s pension plan during the period indicated in the heading on the income statement. Information on pensions...
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
A right to buy a specific number of shares of stock at a specific price by a specific date.
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,...
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.
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
For example.
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
A potential loss that is dependent upon some future event occurring or not occurring. If the loss is probable and the amount can be estimated, then the loss and a liability are recorded with a journal entry. If the loss...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
The cost transferred from one department to the next department in a process costing system.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
See bearer bond.
Often referred to as write-up work, a compilation refers to financial statements prepared by an accountant without reviewing or auditing the amounts. Often the accountant merely takes a client’s amounts and...
The formal planning for significant expenditures, such as property, plant and equipment.
The cost of telephone service that was used during the period shown on the income statement.
No insurance. If a company chooses to self insure for fire damage, it does not have insurance for fire damage. Companies with a chain of stores in various cities may decide not to have insurance, since their risk is...
A word used by accountants to communicate that an expense has occurred and needs to be recognized on the income statement even though no payment was made. The second part of the necessary entry will be a credit to a...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
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...
See equivalent units of production.
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
Merchandise that was returned to the seller by a customer. This account is a contra sales account. When merchandise sold on credit is returned, this account is debited and Accounts Receivable is credited.
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
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...
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