Taking out a loan or issuing bonds in order to acquire an asset or another business.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
An official pronouncement by the Financial Accounting Standards Board that involves a previously issued FASB Standard. FASB Interpretations are part of the generally accepted accounting principles.
A long term asset account containing the cost of delivery equipment acquired by a company and used in its business. The account will appear on the balance sheet under the heading of Property, Plant and Equipment. There...
See cash surrender value.
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
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...
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
See carrying amount.
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
Usually a permanently restricted asset for which the principal portion must be retained indefinitely. The earnings from an endowment fund could be unrestricted or temporarily restricted.
Also referred to as real accounts. Accounts that do not close at the end of the accounting year. The permanent accounts are all of the balance sheet accounts (asset accounts, liability accounts, owner’s equity...
A document that discloses various conditions and terms of the company’s bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
Support that has been either temporarily or permanently restricted by the donor.
Individuals elected by the common stockholders of a corporation to represent the stockholders and to establish the policies of the corporation. The board of directors appoints the officers of the corporation and declares...
The abbreviation for the accounting and bookkeeping term debit.
The relationship between two variables. There can be correlation without a cause-and-effect relationship. Also see coefficient of correlation.
The ability to generate cash.
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
Point of sale.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
See inventory: work-in-process (WIP).
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...
See cash surrender value.
See donor-imposed restriction.
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
See freight-in.
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
See not sufficient funds (NSF) check.
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
A term that refers to a negative checking account balance. It arises when a company writes checks in excess of the amount it has on deposit in its checking account.
Corporations whose stock is traded on stock exchanges. Also referred to as publicly-traded corporations.
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...
A current asset account which contains the amount of investments that can and will be sold in the near future.
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