Point of purchase.
Point of purchase.
The net amount of revenues and gains minus expenses and losses for the current year for the sole proprietorship owned by R. Smith. After the financial statements are prepared for the year, this amount will be transferred...
A class of corporation stock that provides for preferential treatment over the holders of common stock in the case of liquidation and dividends. For example, the preferred stockholders will be paid dividends before the...
A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
A liability account whose balance is the unpaid principal balance as of the balance sheet date. The amount of principal required to be paid within 12 months of the balance sheet date is reported as a current liability....
Taking out a loan or issuing bonds in order to acquire an asset or another business.
The amount of principal owed on a loan. On the typical mortgage loan, a portion of the monthly payment is applied to interest and principal. The amount of principal that remains after the principal payment is the unpaid...
The journal entry recorded in the general journal (as opposed to the sales journal, cash journal, etc.).
Often this account appears as a line in the retained earnings section of stockholders’ equity (balance sheet) and will show the year-to-date net income. The reason is that some accounting software will not put the...
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
See cash surrender value.
See fixed expenses.
A person or business that has a checking account or savings account at a bank.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
Under the accrual method of accounting, this account reports the amount of wages that the delivery employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
See economic order quantity (EOQ) model.
A technique used when processing accounts payable in order to be certain that only legitimate bills and invoices are paid. Its name is derived from the matching of 1) the vendor invoice with 2) the company’s...
Federal government securities with a fixed interest rate and maturing in more than 10 years.
Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine...
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
See direct materials usage variance.
Net income divided by net sales.
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).
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
See cost-volume-profit (CVP).
Regression analysis with only one independent variable.
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.
The amount an employee “clears” on her or his payroll check. It is also the “net” amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for...
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...
See CPA Exam.
Financial statements prepared by an accountant based on the amounts provided by a client. The accountant does not review or audit the amounts provided and therefore does not provide any assurances regarding the validity...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
An asset account used to record a loan to another party that has real estate as collateral.
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
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