The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the...
The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the...
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
What are the disclosures for a manufacturer's inventory? A manufacturer should disclose the following categories of inventory: raw materials, work-in-process, finished goods, manufacturing supplies, and packaging...
See American Institute of Certified Public Accountants.
A term meaning behind, such as dividends in arrears, or something occurring at the end of a period, such as the recurring payment in an annuity in arrears.
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
Weekly Income Statement When I became a director of a meatpacking company, I was concerned about the thin profit margins, the corporation’s lack of working capital, and my inexperience in the industry. The company...
The current price for a commodity or other item to be delivered immediately.
A reduction in the original selling price.
The result of the sale of an asset for less than its carrying amount; the write-down of assets; the net result of expenses exceeding revenues.
What conditions cause a discount on bonds payable? Discount on bonds payable occurs when a bond’s stated interest rate is less than the bond market’s interest rate. If a $1,000,000 bond issue promises to pay interest...
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
What is the abbreviation for debit and credit? Abbreviation for Debit and Credit The abbreviation for debit is dr. and the abbreviation for credit is cr. Apparently the “dr.” is associated with the term used in Italy...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
Goods or services provided instead of money.
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
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...
An asset’s cost that has been assigned to Depreciation Expense.
What is the cost to store inventory? Definition of Cost to Store Inventory The cost to store, hold or carry inventory is the total of the following: Cost of the space used for storing inventory, such as rent, heat,...
See absorption costing.
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
See old-age, survivor, and disability insurance (OASDI).
The difference between the call price of a bond or preferred stock and its stated or par value.
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
Sometimes used as a heading in place of paid-in capital.
The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.
Bonds and other debt securities that a company intends to hold until the securities mature. In addition to intent, the company must have the financial ability to be able to hold them until they mature.
See petty cash receipt.
Financial statements prepared by an accountant based on the amounts provided by a client. The accountant does not review or audit the amounts provided and therefore does not provide any assurances regarding the validity...
What is a stock split? Definition of Stock Split A stock split usually refers to a corporation dividing its existing number of shares of common stock into a greater number of shares. For instance, a corporation with...
The point at which several products emerge from a common process.
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