A negative balance in the bank’s records for the company’s checking account.
A negative balance in the bank’s records for the company’s checking account.
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
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 term used by manufacturers to indicate that the manufacturing overhead applied or assigned to its production is greater than the amount actually incurred.
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
See Accounting Research Bulletin.
A quality of accounting information that facilitates the comparison of financial reporting of one company to the financial reporting of another company.
The time between when a check is written and when the check clears the bank account on which it is drawn.
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
See sole proprietorship.
The revenue classification used by nonprofit organizations to account for the amounts received as donations. It is also an expense classification for the donations made to another nonprofit organization. Contributions...
A trademark associated with a service rather than a product.
A legal entity organized under state laws that is considered separate from its owners. Ownership is evidenced by shares of stock.
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...
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
The generally accepted accounting principles practiced in the United States.
Additions or changes to a rented building that are made by the tenant rather than by the landlord. The tenant will record the cost of these changes in the long term asset account Leasehold Improvements. The cost of these...
A liability account on the books of a company receiving cash in advance of delivering goods or services to the customer. The entry on the books of the company at the time the money is received in advance is a debit to...
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...
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...
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
An invoice or other document received from a vendor, supplier, etc. usually for goods or services received. Also a verb to indicate that a customer’s sales invoice should be prepared for goods or services.
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
Usually a plastic card that is used in place of writing a check. The amount of the transaction is immediately deducted from the user’s checking account.
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
Also referred to as peripheral activities. A company’s activities outside of its main activities of buying/producing and selling. Examples include a retailer’s financing function involving interest revenue...
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
A bond with collateral.
A statistic known as the coefficient of determination. This statistic indicates the percent change in the dependent variable that is explained by the change in the independent variable(s).
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
See Explanation of Standard Costing.
account. When the annual real estate taxes come due, the lender pays the real estate taxes by using the money in the borrower’s escrow account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
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...
A current asset account which contains the amount of investments that can and will be sold in the near future.
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
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