Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
An estimate of an asset’s market value
See premium on bonds payable.
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
See quality of earnings.
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.
See manufacturing costs.
The acronym for original equipment manufacturer.
A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.
A word to describe whether a company is able to earn more revenues than expenses.
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
The internal growth of a company’s existing businesses. Organic growth excludes the additional sales resulting from acquiring another company.
What is materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
See post balance sheet event.
A company’s loss before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
In securities, a party that assists a company in issuing stock or bonds.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
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...
What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
Usually means to scrap a long-term plant asset and receive no proceeds from its disposal.
See Public Company Accounting Oversight Board (PCAOB).
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
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...
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
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...
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
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...
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
See income statement. To learn more, see Explanation of Income Statement.
What is the difference between book depreciation and tax depreciation? Definition of Book Depreciation Book depreciation is the amount recorded in the company’s general ledger accounts and reported on the company’s...
A bond issued with a series (or staggering) of maturity dates.
The person or organization to whom a check is written.
The difference between the actual amount and the budgeted amount.
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.
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