See fixed expenses.
See fixed expenses.
The Roman numerals that indicate 1,000,000.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
The standards, rules, guidelines, and industry-specific requirements for financial reporting. To learn more about accounting principles, see our Accounting Principles Outline.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
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...
The process of comparing the amounts in the Cash account in the general ledger to the amounts appearing on the bank statement. The objective is to be certain that there is consistency between the amounts and that the...
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
The increase in a carrying amount. Also see write-up work.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
Segments of a business. For example, a corporation may have a consumer division and an industrial division in order to improve its effectiveness in marketing its goods.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
Life insurance without a cash value.
The cost of the next unit.
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
See Explanation of Financial Ratios.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
Revenue that has been earned but not yet invoiced to the customer.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
See full disclosure principle.
The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.
Inventory that is less than the expected amount. It might be associated with theft or damage.
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
An allocation based on some proportions. For example, a corporation’s taxable income that was earned in many of the U.S. states might be allocated or apportioned to the states in which the corporation has conducted...
The cost associated with setting up a piece of production equipment. This would include the cost of the setup mechanic, the cost of scheduling, record keeping, moving the starting material, and testing the first few...
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
Classifying expenses according to the type of work such as selling, administration, general, and financing.
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...
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
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...
Featured Review
"I currently work in accounting as an accounts receivable manager in the healthcare industry. I first found the AccountingCoach website and became a PRO user because I needed to brush up on my accounting skills, as I had been out of the field for 20 years while raising children. I knew I needed a source that would help me achieve that. I like the simple format and the ability to navigate the website easily. I also like how well organized the material is, as well as being able to access the material on my own schedule and find the topics that I'm specifically interested in. The material has really helped me get my skill set and knowledge current again. And to remind me that I hadn't forgotten as much as I thought I had!" - Kathi H.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: