What is the difference between the terms capitalize and depreciate? Definition of Capitalize In accounting, the term capitalize refers to adding an amount to the balance sheet as an asset (as opposed to immediately...
What is the difference between the terms capitalize and depreciate? Definition of Capitalize In accounting, the term capitalize refers to adding an amount to the balance sheet as an asset (as opposed to immediately...
What are conversion costs? Definition of Conversion Costs Conversion costs is a term used in cost accounting that represents the combination of direct labor costs and manufacturing overhead costs. In other words,...
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...
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
Accounts Receivable and Bad Debts Expense (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (27) Marked Wrong (0) Marked Right (0) accounts receivable This current asset represents a right to...
Break-even Point (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (34) Marked Wrong (0) Marked Right (0) break-even point This is the number of units or the revenues needed by a company in order...
Income Statement (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (37) Marked Wrong (0) Marked Right (0) income statement (or) statement of earnings (or) statement of operations This financial...
How are period costs reported in the financial statements? Under the accrual method of accounting, period costs such as selling, general and administrative expenses are reported on the income statement in the accounting...
This term refers to checking account balances. On a bank’s balance sheet, demand deposits are reported as current liabilities.
A balance sheet line to report short-term assets that are too insignificant to be identified separately.
A balance sheet line to report short-term liabilities that are too insignificant to be identified separately.
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
A term that describes the steps when processing transactions (analyzing, journalizing, posting, preparing trial balances, adjusting, preparing financial statements) in a manual accounting system. Today many of the steps...
A term to mean the company’s general ledger or accounting records.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
The term used by manufacturers to indicate that its manufacturing overhead applied or assigned to its output is less than the amount actually incurred.
This term is associated with preferred stock that does not allow its holders to receive more than its stated dividend. The nonparticipating feature is typical in preferred stock. To learn more about preferred stock, see...
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
The term that refers to the stock of a corporation which is traded on the stock exchanges (as opposed to stock that is privately held among a few individuals).
A term used to describe checks written by a company that have been received and paid by the bank on which they were drawn or written. The check number and amount will appear on the company’s checking account...
The result of subtracting total liabilities from total assets. It is also the term used by not-for-profit organizations instead of owner’s equity or stockholders’ equity. To learn more see our Explanation of...
A term that refers to a negative checking account balance. It arises when a company writes checks in excess of the amount it has on deposit in its checking account.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
A Latin term that means in proportion. See prorate.
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
A term often used when referring to production workers and other workers who are paid with an hourly pay rate. These workers’ compensation is referred to as “wages” (as opposed to salaries).
A term used in break-even analysis to indicate the amount of sales that are above the break-even point. In other words, the margin of safety is the amount by which a company’s sales could decrease before the...
The term used by manufacturers to indicate that the manufacturing overhead applied or assigned to its production is greater than the amount actually incurred.
In financial accounting this term often refers to the accounting guidelines or principles of conservatism and materiality.
A shortened version of the term bank reconciliation or bank statement reconciliation.
This term is often associated with an investment in the common stock (and/or preferred stock) of a corporation when the stock is publicly traded.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
The term associated with payroll deductions from an employee’s gross wages or gross salary.
A term meaning behind, such as dividends in arrears, or something occurring at the end of a period, such as the recurring payment in an annuity in arrears.
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
The accounting term that means an entry will be made on the left side of an account. To learn more about debits and credits, see our Debits and Credits Outline.
A term often used when referring to office workers, managers, professionals, and executives. These employees’ pay is often stated as a salary for a month (and not as an hourly pay rate).
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