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.
A simple form of business where there is one owner. Legally the owner and the sole proprietorship are the same. However, for accounting purposes the economic entity assumption results in the sole proprietorship’s...
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...
A revenue account that reports the sales of merchandise. Sales are reported in the accounting period in which title to the merchandise was transferred from the seller to the buyer.
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s pension plan during the period indicated in the heading on the income statement. Information on pensions...
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Suppliers. Companies that provide goods or services.
Point of purchase.
A class of corporation stock that provides for preferential treatment over the holders of common stock in the case of liquidation and dividends. For example, the preferred stockholders will be paid dividends before the...
Taking out a loan or issuing bonds in order to acquire an asset or another business.
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
See cash surrender value.
are responsible for both the employee and employer portions of FICA. Social Security involves retirement and disability benefits. Medicare involves health care for people 65 years of age and older. Join PRO to Track...
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
A person or business that has a checking account or savings account at a bank.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
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.
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
See economic order quantity (EOQ) model.
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
Net income divided by net sales.
The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
an additional share of stock, the difference of $19.90 will be recorded in a separate stockholders’ equity account entitled Premium on Common Stock or Paid-in Capital in Excess of Par Value–Common Stock . Join PRO...
Regression analysis with only one independent variable.
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.
The compensation usually associated with executives, managers, professionals, office employees, etc. whose pay is stated on an annual or on a monthly basis. (On the other hand, “wages” is usually associated...
produces 3,700 units, the depreciation expense will be $3,700. Both of these depreciation calculations are logical, consistently applied, and objective. Join PRO to Track Progress Mark the Question as Read Must-Watch...
to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter the workforce Pass your...
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
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 current liability account that reports the amounts owed to employees for hours worked but not yet paid as of the date of the balance sheet.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
An item that is dependent on another item. For example, your wages would be a dependent variable and the hours you work would be the independent variable. This relationship is often expressed as y = a + bx, where y is...
Present value.
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