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...
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...
The entry made in a journal. It will contain the date, the account name and amount to be debited, and the account name and amount to be credited. Each journal entry must have the dollars of debits equal to the dollars of...
See bearer bond.
See contingent gain.
Pushing authority and decision making down to the managers and employees who are closer to the work.
The owner of property that often receives rent from tenants.
No insurance. If a company chooses to self insure for fire damage, it does not have insurance for fire damage. Companies with a chain of stores in various cities may decide not to have insurance, since their risk is...
The present fair market value.
See residual income (RI).
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
Merchandise that is not owned by the party in possession of the goods. For example, a craftsperson might have produced 100 ornate wood items. In order to sell the items, the person asks a local merchant to take five of...
The time required to set up a piece of production equipment.
Suppliers. Companies that provide goods or services.
The accounting or bookkeeping system that does not utilize computer software for entering transactions into journals and ledgers.
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
A journal entry to correct an erroneous amount previously entered in the general ledger.
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
Usually a person without a four-year or five-year accounting degree employed to record routine financial transactions for smaller companies.
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).
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
For example.
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.
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
The amount at which the holder of preferred stock or bonds must sell the stock or bonds back to the issuing corporation. The call price is disclosed in the indenture. The call price might be the face or par amount plus...
See Internal Revenue Service (IRS).
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
See stockholder.
A written opinion of an independent certified public accountant that a company’s financial statements are a fair representation of the company’s financial performance and financial position. The...
What is the abbreviation for debit and credit? Abbreviation for Debit and Credit The abbreviation for debit is dr. and the abbreviation for credit is cr. Apparently the “dr.” is associated with the term used in Italy...
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
See functional expense classification.
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
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