Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
See absorption costing.
One of the types of donor-imposed temporary restrictions. An example of a purpose restriction is a cash donation with a donor-imposed requirement that the money be used only to purchase a vehicle for one of its programs....
See old-age, survivor, and disability insurance (OASDI).
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
Raw materials that are a traceable component of a manufactured product. For example, the direct material of a baseball bat is the wood. Flour, sugar, and vegetable oil are direct materials of a company that manufactures...
In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.
A long-term asset account reported on the balance sheet under the heading of property, plant, and equipment. Included in this account would be copiers, computers, printers, fax machines, etc.
A form used at a bank to inform its customer that the customer’s account is being reduced for a fee or other charge.
Also referred to as shareholders’ equity. At a corporation it is the residual or difference of assets minus liabilities. To learn more about stockholders’ equity, see our Stockholders’ Equity Outline.
Usually means every two weeks. For example, if an employee is paid every other Thursday, the employee is paid biweekly. The person paid biweekly will receive 26 paychecks per year. (People paid two times per month...
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
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.
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
The multiplication of a quantity times its cost. For example, if 100 items are in inventory at a cost of $3.46 each, the inventory extension is $346.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
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.
See limited liability company.
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
A lease that “in substance” is a purchase and financing arrangement. When a lease meets certain criteria, the asset being “rented” is recorded as an asset and a liability is also recorded. A lease...
A symbol that represents 1000.
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
A symbol that indicates the total amount of fixed costs during a specified period of time. In the equation of the straight line, y = a + bx, the total amount of fixed costs during the period is represented by...
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....
The time from when goods are ordered until the time when the goods are received.
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
The person or organization to whom a check is written.
The person paying rent for using but not owning the asset.
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).
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
What is an uncleared cheque? Definition of Uncleared Cheque An uncleared cheque is a cheque (check) that has been written and recorded in the payer’s records, but has not yet been paid by the bank on which it is drawn....
What is a calendar year? Definition of Calendar Year A calendar year is the 12 consecutive months from January through December. In other words, it is the 365 days (366 days in a leap year) beginning on January 1 and...
See earnings per share.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
A legal entity organized under state laws that is considered separate from its owners. Ownership is evidenced by shares of stock.
What is the difference between net cash flow and net income? Definition of Net Cash Flow Net cash flow is the combination of the cash received and the cash disbursed. In other words, it is the combination of the debit...
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
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