What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at...
To learn more, see our Financial Ratios Outline.
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
What is a customer deposit? Definition of Customer Deposit A customer deposit could be money that a company receives from a customer prior to the company earning it (by providing the customer with goods or services). In...
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
The additional revenues from an additional quantity. It is similar to marginal revenue, except that marginal revenue refers to the revenue from the next unit. Incremental revenue might be the additional revenues from the...
Receivables due from customers. See accounts receivable.
Paper evidence of ownership in a corporation. The certificate would indicate the type of stock (common, preferred), any restrictions pertaining to the sale of the stock, the number of shares, the par value, etc. Today,...
See notes to financial statements.
See residual income (RI).
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...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
Under the accrual basis of accounting this income statement account reports the amount of commissions expense that pertains to the revenues earned by the company during the accounting period shown in the heading of the...
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...
See perpetual system of inventory.
The ability to generate cash.
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
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...
See stockholder.
The internal growth of a company’s existing businesses. Organic growth excludes the additional sales resulting from acquiring another company.
The abbreviation for the accounting and bookkeeping term debit.
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....
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
See sales.
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
See not sufficient funds (NSF) check.
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....
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...
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
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....
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