Actual changes in cash as opposed to accounting revenues and expenses.
Actual changes in cash as opposed to accounting revenues and expenses.
See sales discounts.
Scrap or waste that should have been avoided. In other words, abnormal spoilage is the amount that is over and above the normal amount that is expected in a production process.
Net income divided by net sales.
See mixed expenses.
What does it mean to rotate stock? Definition of Rotating Inventory Stock To rotate stock means to arrange the oldest units in inventory so they are sold before the newer units. The goal is to avoid losses due to getting...
Spoilage or waste that is likely to occur and cannot be avoided at a reasonable cost.
The current asset that represents the amount of interest revenue that was reported as earned, but has not yet been received.
If a company earns a profit, which balance sheet items change? Definition of Profit Profit is the result of revenues minus expenses. How Profits Change the Balance Sheet Since all business transactions affect at least...
Sending merchandise to another party (an agent, consignee) in order to sell the merchandise. Also see consigned goods.
Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
See not sufficient funds check.
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...
What is the statement of cash flows? Definition of Statement of Cash Flows The statement of cash flows (SCF) is one of the required external financial statements. The SCF is commonly referred to as the cash flow...
An amount remaining after another amount is subtracted. In the accounting equation, owner’s equity is the residual of assets minus liabilities.
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to be...
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
See separation of duties.
A right to buy a specific number of shares of stock at a specific price by a specific date.
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...
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
What are some examples of investing activities? Definition of Investing Activities Investing activities often refers to the cash flows from investing activities, which is one of the three main sections of the statement...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
Another word for purchasing.
Is it acceptable for companies to use two methods of depreciation? Definition of Depreciation Methods There are various methods of depreciating assets that are used in a business. It is acceptable and common for...
See International Accounting Standards Board (IASB).
The sum of future amounts multiplied by their respective probabilities of occurrence.
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
A budget that does not flex for changes in volume or activity.
To repurchase bonds that the company had previously issued.
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
See Explanation of Standard Costing.
Usually a claim on an asset that is pledged as collateral. The lien is usually filed with a government office.
The record of checks issued or written, deposits, bank charges, bank credits and the resulting balance. Also referred to as the check register.
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
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