A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
to the company on January 10; however, the bill will be approximately $6,000. Under the accrual method of accounting, the company must accrue this expense and liability prior to issuing its December 31 financial...
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
are responsible for both the employee and employer portions of FICA. Social Security involves retirement and disability benefits. Medicare involves health care for people 65 years of age and older. Join PRO to Track...
See consistency.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
See debenture bond.
The party receiving goods to be sold. See consigned goods.
The relationship between two variables. There can be correlation without a cause-and-effect relationship. Also see coefficient of correlation.
A dividend paid in assets other than cash.
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
, etc. Recording a Bill Payable Under the accrual method of accounting or bookkeeping, a bill payable or unpaid vendor invoice is recorded in Accounts Payable with a credit entry. (The debit will likely be recorded as an...
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
See Accounting Principles Board.
, is now on the bank statement, but it is not in the cash account. Therefore, you need to put the check amount into the general ledger. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
The amount that a bank commits to lend a borrower during a specified purpose.
See uncleared check.
on the credit of the bank instead of the credit of the customer. A letter of credit should not be confused with a line of credit. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
See post balance sheet event.
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
How should a mortgage loan payable be reported on a classified balance sheet? Definition of a Mortgage Loan Payable The account Mortgage Loan Payable contains the principal amount owed on a mortgage loan. (Any interest...
In securities, a party that assists a company in issuing stock or bonds.
See economic order quantity (EOQ) model.
do not mislead a current or potential investor, lender, or other person making a decision with the amounts being reported. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
to increase. If the owner withdraws some cash for personal use, the asset Cash will decrease through a credit and the owner’s equity will decrease through the debit part of the accounting entry. The debit might...
Errors made by the bank on a company’s bank account. These are usually infrequent but could include an incorrect amount of a check or deposit or a check or deposit recorded in the wrong account.
The acronym for cost of goods sold.
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
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.
to the condo project. Hence the drop ship allows XYZ to avoid some expensive non-value-added activities. When Premier ships the water heaters, it will bill XYZ and will send the invoice to XYZ. As a result XYZ will have...
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...
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
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...
See program evaluation and review technique (PERT).
Featured Review
"AccountingCoach is an amazing self-teaching tool for those first starting out and also for those that need the refresher course. It is written in a very engaging style that motivates you to read and continue to learn. It is very easy to understand, and breaks down a complicated subject matter into a progressive 'simple to learn and achieve success' system. I am enjoying AccountingCoach so much. I chose to be a member for life. Adding AccountingCoach to my toolbox has been one of the best investments I've made." - Cheryl
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: