Repairs that do not improve an asset or extend the asset’s life. These repairs are charged to Repairs Expense or Maintenance Expense when incurred. Major repairs such as a complete engine overhaul that extends the...
Repairs that do not improve an asset or extend the asset’s life. These repairs are charged to Repairs Expense or Maintenance Expense when incurred. Major repairs such as a complete engine overhaul that extends the...
A cost and/or volume of activity that is outside of an expected range.
A reference to stockholders’ equity. See paid-in capital. Also an adjective that references property, plant and equipment used in a business; for example, capital expenditures and capital budgeting.
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
Often referred to as fixed assets. This would include long term assets such as buildings and equipment used by a company. Plant assets (other than land) will be depreciated over their useful lives.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
The underlying true cause of a cost occurring. In other words, the root cause is more than a mere correlation between an event and a cost. There is a real cause and effect relationship.
See accrued rent expense. Also see accrued rent income.
Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as “take home pay” or the amount the employee...
See activity-based costing.
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
Regular fees or charges often paid to an organization at regular intervals. For example, a state CPA organization might have annual dues of $200.
See long-term liabilities.
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
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.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
The amount before deductions. For example, gross pay is the amount before withholding deductions. Gross sales is the amount before sales returns and allowances and sales discounts.
See line of credit.
See Supplies.
A loan having the security of a lien on the borrower’s real estate.
See credit memo.
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
A word that means to add a column of numbers as in “Foot the amounts listed in column A.” Also see crossfoot.
To learn more, see our Financial Ratios Outline.
To record accounting entries into a journal.
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
See mixed expenses.
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
The increase in a carrying amount. Also see write-up work.
Future amounts that have been discounted to the present.
Also referred to as the useful life. This differs from the physical life of an asset. For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
An Italian monk associated with debits, credits, and double-entry accounting approximately 500 years ago.
The person paying rent for using but not owning the asset.
A report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
A lien on real estate to protect a lender. The loan made with such security is referred to as a mortgage loan.
The person or organization to whom a check is written.
See Securities and Exchange Commission.
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