differences. Since most companies use the double-entry system of accounting, any omission or error in the company’s general ledger Cash account also means that at least one other general ledger account will have a...
differences. Since most companies use the double-entry system of accounting, any omission or error in the company’s general ledger Cash account also means that at least one other general ledger account will have a...
A quality of accounting information that facilitates the comparison of financial reporting of one company to the financial reporting of another company.
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...
See time period assumption.
An actual count of the goods owned by the company. The actual counts are then compared to the quantities reported on the detailed inventory records. If a difference exists, the quantity shown on the inventory record...
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
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Revenue that has been earned but not yet invoiced to the customer.
The average time it takes for a retailer’s or manufacturer’s inventory to turn to cash. If a manufacturer turns its inventory six times per year (every two months) and allows customers to pay in 30 days, its...
entered as a debit and at least one account will have an amount entered as a credit. Further, the total amounts entered as debits must be equal to the total amounts entered as credits. Meeting these requirements will...
Occurring twice per month. For example, if salaried personnel are paid on the 15th and the last day of the month, we would say they are paid semimonthly. People paid semimonthly will receive 24 paychecks during a year....
A book of original entry that requires that both the account being debited and the account being credited be listed along with the respective amounts. Because of accounting software and special journals there are...
A formal written promise to pay interest every six months and the principal amount at maturity.
The date on which the board of directors of a corporation declares a dividend on the corporation’s stock. On this date an accounting entry is made to debit Retained Earnings and to credit Dividends Payable.
This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
A check that has been issued but has not yet been paid by the bank on which it is drawn. An uncleared check is also known as an outstanding check.
Often referred to as write-up work, a compilation refers to financial statements prepared by an accountant without reviewing or auditing the amounts. Often the accountant merely takes a client’s amounts and...
A phrase used to communicate the total compensation of a salaried employee. Fringe benefits (health insurance, vacation days, sick days, employer matching of Social Security and Medicare taxes, pension or 401-k...
A heading that includes common stock and preferred stock.
See chief operating officer.
An allocation based on some proportions. For example, a corporation’s taxable income that was earned in many of the U.S. states might be allocated or apportioned to the states in which the corporation has conducted...
A journal entry made on the first day of a new accounting period to undo the accrual type adjusting entries made prior to the preparation of the financial statements dated one day earlier. Reversing entries allow for an...
See discount on bonds payable.
Usually a claim on an asset that is pledged as collateral. The lien is usually filed with a government office.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
See electronic funds transfer.
One of the main financial statements. The balance sheet reports the assets, liabilities, and owner’s (stockholders’) equity at a specific point in time, such as December 31. The balance sheet is also referred...
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
transaction To move an amount from an incorrect account (that was used when recording a previous transaction) to the correct account Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
See return on capital employed.
A budget that does not flex for changes in volume or activity.
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
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.
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
and asked that his billing period be changed to cover the calendar month. They were pleased to make the change. Next, the owner called his bank and asked if the bank would be able to deduct the current month’s loan...
Financial Executives Institute.
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity due. An example would be the monthly rent on an apartment.
The abbreviation of the accounting and bookkeeping term credit.
Manufactured products that are often expressed in units, machine hours, etc.
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