An estimated income statement for a future period of time that is based on projected or budgeted transactions.
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
One of the main financial statements (along with the income statement and balance sheet). The statement of cash flows reports the sources and uses of cash by operating activities, investing activities, financing...
Dollars of gross profit divided by the dollars of net sales. Also known as gross margin.
A quality of accounting information that facilitates the comparison of financial reporting of one company to the financial reporting of another company.
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...
See time period assumption.
A highly summarized balance sheet
An actual count of the goods owned by the company. The actual counts are then compared to the quantities reported on the detailed inventory records. If a difference exists, the quantity shown on the inventory record...
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
Usually a department within a company that is responsible for its costs but not revenues or profit.
The average time it takes for a retailer’s or manufacturer’s inventory to turn to cash. If a manufacturer turns its inventory six times per year (every two months) and allows customers to pay in 30 days, its...
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
Occurring twice per month. For example, if salaried personnel are paid on the 15th and the last day of the month, we would say they are paid semimonthly. People paid semimonthly will receive 24 paychecks during a year....
A tax usually paid by the employer based on the first $7,000 to $30,000+ (varies by state) of each employee’s annual salaries and wages. The majority of the tax is paid to the state, since the state administers the...
A book of original entry that requires that both the account being debited and the account being credited be listed along with the respective amounts. Because of accounting software and special journals there are...
A formal written promise to pay interest every six months and the principal amount at maturity.
A variance arising in a standard costing system that indicates the difference between the standard cost of direct labor for the good output (standard hours times standard rate) and the standard cost of the actual hours...
The date on which the board of directors of a corporation declares a dividend on the corporation’s stock. On this date an accounting entry is made to debit Retained Earnings and to credit Dividends Payable.
Also known as a journal.
This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
A balance sheet with classifications (groupings or categories) such as current assets, property plant and equipment, current liabilities, long term liabilities, etc. To learn more, see Explanation of Balance Sheet.
A check that has been issued but has not yet been paid by the bank on which it is drawn. An uncleared check is also known as an outstanding check.
Often referred to as write-up work, a compilation refers to financial statements prepared by an accountant without reviewing or auditing the amounts. Often the accountant merely takes a client’s amounts and...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
A corporation with a limited number of stockholders and whose stock is usually not publicly traded.
See petty cash replenishment.
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
A cash dividend that has been declared by the board of directors, but not yet paid.
A heading that includes common stock and preferred stock.
See chief operating officer.
A liability account that reports amounts received in advance of providing goods or services. When the goods or services are provided, this account balance is decreased and a revenue account is increased. To learn more,...
A journal entry made on the first day of a new accounting period to undo the accrual type adjusting entries made prior to the preparation of the financial statements dated one day earlier. Reversing entries allow for an...
See discount on bonds payable.
An accounting guideline that requires information pertinent to an investing or lending decision to be included in the notes to financial statements or in other financial reports.
Usually a claim on an asset that is pledged as collateral. The lien is usually filed with a government office.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
See contractual interest rate.
See inventory: work-in-process (WIP).
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