The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
See uncleared check.
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
See not sufficient funds (NSF) check.
The expenses directly incurred by a nonprofit organization in providing one of its programs.
What are net assets? Definition of Net Assets Net assets is defined as total assets minus total liabilities. Examples of Net Assets In a sole proprietorship the amount of net assets is reported as owner’s equity. In a...
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
See discounted cash flow model.
See freight-in.
A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
Savings accounts and certificates of deposits at a bank.
See discount on bonds payable.
Using debt in order to control more assets. Also known as financial leverage.
Where is a manufacturer's inventory reported in the balance sheet? A manufacturer’s inventory will be reported in the current assets section of the balance sheet and in the notes to the financial statements. In the...
A stated legal amount often appearing on preferred stock, bonds, and some common stock.
A balance on the right side (credit side) of an account in the general ledger.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
The amount a company owes for expenses or losses incurred that have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting Entries.
What are consolidated financial statements? Definition of Consolidated Financial Statements Consolidated financial statements are financial statements for a group of separate legal entities that are controlled by one...
See donor-imposed restriction.
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
A shortened version of the term bank reconciliation or bank statement reconciliation.
The par value of common and preferred stock.
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
What are invoice payment terms? Definition of Invoice Payment Terms Invoice payment terms appear as part of the information shown on the invoice (or bill) prepared by a seller of goods or a provider of services....
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
A document that discloses various conditions and terms of the company’s bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.
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)....
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
Billing a client based on the value of the information or service provided rather than billing based on time spent.
What is the days' sales in inventory ratio? Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to sell its inventory during a recent...
Featured Review
"I found myself in need of reviewing many topics in accounting and accounting principles used in the US. I looked into many accounting courses, but I found AccountingCoach to be the best and most reliable accounting resource ever! I like it because it is very well organized and user friendly. I was able to easily find the topics I needed and understand perfectly what was required, as the material provides thorough and detailed explanations with examples and practice quizzes to test your knowledge at the end of each topic. I love that it covers all the information needed in accounting and finance, with hints and reasonable financial analysis when it comes to financial ratio studies that would interest anyone working in those industries. I am really grateful to have AccountingCoach! Thank you, professional gentlemen, for creating such a great and trustworthy source of accounting information. It has made my life easier! I highly recommend it to everyone in the field." - Roula K.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: