What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
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)....
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
A word to describe whether a company is able to earn more revenues than expenses.
What does the term organic growth mean? Organic growth often refers to the growth in a company’s sales that did not occur because of an acquisition of another company. Expressed another way, organic growth is...
The activities provided by a nonprofit in carrying out one of its major programs.
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
The cost of telephone service that was used during the period shown on the income statement.
Expenses which do not change in response to reasonable changes in sales or other activity.
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.
See bearer bond.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
What is Additional Medicare Tax? Definition of Additional Medicare Tax The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In...
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...
A certified public accountant (CPA) who practices accounting in his or her own firm without another CPA as a partner or shareholder.
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.
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...
See deferred expense.
In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.
What is equity? Definitions and Examples of Equity Equity has several definitions that pertain to accounting: Equity can indicate an ownership interest in a business, such as stockholders’ equity or owner’s equity....
See first in, first out (FIFO).
A Latin term that means in proportion. See prorate.
A corporation has a large balance in retained earnings. Does that mean that its dividends to stockholders will be increasing? Definition of Retained Earnings Retained earnings is one part of a corporation’s...
What are the notes to the financial statements? Definition of Notes to Financial Statements The notes to the financial statements are a required, integral part of a company’s external financial statements. They are...
The additional revenues from an additional quantity. It is similar to marginal revenue, except that marginal revenue refers to the revenue from the next unit. Incremental revenue might be the additional revenues from the...
See unrelated business income tax.
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
See contingent loss.
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
See inventory: work-in-process (WIP).
See contingent gain.
See fixed manufacturing overhead volume variance.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
What is capital stock? Definition of Capital Stock Capital stock refers to the shares of ownership that have been issued by a corporation. The amount received by the corporation when its shares of capital stock were...
The combination of a manufacturer’s direct labor and factory overhead.
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
The additional amount given to employees for the overtime hours. Usually this is the “half-time” in time and one-half. For example, if an employee’s hourly pay rate is $10 per hour and the employee...
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
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