A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
See sole proprietorship.
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
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.
An employee that must be paid overtime pay when the employee’s weekly hours exceed 40 hours. Some states may have additional requirements. Nonexempt employees include both hourly-paid and salary-paid who are not...
See our Standard Costing Outline.
See Financial Accounting Standards Board.
In financial accounting this term often refers to the accounting guidelines or principles of conservatism and materiality.
Future amounts that have been discounted to the present.
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
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...
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
See absorption costing.
Also known as freight-out or as delivery expense. This is an operating expense further classified as a selling expense. It results when merchandise is sold with terms of FOB destination.
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000,...
The time from when goods are ordered until the time when the goods are received.
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
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...
Also known as a CD. A bank time deposit (savings deposit) that cannot be withdrawn until a specified date. For example, a CD might mature in 6, 9, 12, or 18 months. If the amount deposited in a CD needs to be withdrawn...
Why are bonds payable less costly than common stock? Bonds payable are less costly than common stock because the bonds issued by a corporation contain a formal contract to pay the investor a fixed amount of interest...
A company’s sales in a market as compared to the total sales in that market. For example, General Motors share of the U.S. market has decreased from more than 50% in the 1960’s to its present market share of...
The amount a company owes for expenses or losses incurred that have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting Entries.
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
See sales.
Federal Unemployment Tax Act. See federal unemployment tax.
The collection of money (currency, coins, checks). Not to be confused with revenues.
Usually the pay for the hours worked in excess of 40 hours per week. Federal laws require payment for these hours for employees who are not able to control their hours. For example, a company is required to pay a...
What is a deposit in transit? Definition of Deposit in Transit A company’s deposit in transit is the currency and customers’ checks that have been received and are rightfully reported as cash on the date received,...
See long-term liabilities.
Net sales is the gross amount of Sales minus Sales Returns and Allowances, and Sales Discounts for the time interval indicated on the income statement.
See not sufficient funds check.
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
The ability to generate cash.
See credit memo.
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...
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