An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
Magnetic ink character recognition.
The revenue from the next unit.
The planned or expected costs. Often used in manufacturing for accounting for inventories and production. When actual costs differ from the standard costs, variances are reported.
A document that discloses important information on bonds or preferred stock. Included in the indenture would be the call price, the actions that can occur if the company fails to pay the interest or dividend, etc.
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
A stakeholder is anyone that has an interest or is affected by a decision. For example, some of the stakeholders of a state university include the students, students’ families, alumni, professors, custodians,...
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
See goods in transit.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
An original record containing the details to substantiate a transaction entered in an accounting system. For example, the source document for a purchase of merchandise is the supplier’s invoice supported by the...
The person paying rent for using but not owning the asset.
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
See bill of materials.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
In the EOQ model, order costs are the incremental costs of processing an order of goods from a supplier. Examples of order costs include the costs of preparing a requisition, a purchase order, and a receiving ticket,...
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
An actual count of the goods owned by the business.
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
See certified public accountant.
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
See Explanation of Inventory and Cost of Goods Sold.
A sole proprietorship, partnership, or corporation organized for the purpose of earning profits and enhancing the financial position of the owners.
Verifiable, objective (not subjective), and you can depend on it.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
See activity-based costing.
Inventory that is less than the expected amount. It might be associated with theft or damage.
The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.
A loan having the security of a lien on the borrower’s real estate.
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 net realizable value.
See economic order quantity (EOQ) model.
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
The amount that a bank commits to lend a borrower during a specified purpose.
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...
In securities, a party that assists a company in issuing stock or bonds.
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