This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
The balance in a business record such as a general ledger account.
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
An owner’s equity account that reports the amount the sole proprietor invested in the company plus earnings of the company not withdrawn by the owner.
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
The operating activities of a company, excluding the major segments of the company that are being discontinued.
The amount that would be agreed upon by two independent persons. The amount to be received in the ordinary course of business in an arm’s length transaction.
See current portion of long-term debt.
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
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...
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.
The best fitting line through a series of points as determined by the least-squares method.
See cash surrender value.
Recording an entry in an account in the general ledger or in a subsidiary ledger.
A statement that shows the changes in retained earnings from one point to another.
See manufacturing costs.
How do you record the interest that is unpaid on a note payable? Definition of Interest Unpaid on Note Payable Interest that has occurred, but has not been paid as of a balance sheet date, is referred to as accrued...
The acronym for original equipment manufacturer.
See internal rate of return.
What is a creditor? Definition of Creditor A creditor could be a bank, supplier or person that has provided money, goods, or services to a company and expects to be paid at a later date. In other words, the company owes...
See Statement of Financial Accounting Standards.
Contributions collected by Charity #1 who is merely acting as a collection agent for Charity #2. Also known as flow-through contributions.
See Explanation of Standard Costing.
Generally, securities that can be sold quickly in the stock or bond market and where the investor’s intention is to sell them within one year of the balance sheet date.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
See inventory: work-in-process (WIP).
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
One component of financial statement analysis. This method involves financial statements reporting amounts for several years. The earliest year presented is designated as the base year and the subsequent years are...
A current asset that reports the amount paid for advertising that has not yet taken place. When the advertising occurs the prepaid advertising is reduced and advertising expense is recorded.
How do you treat voided checks on the bank reconciliation? Definition of Voided Check on Bank Reconciliation If a check was voided in the current month but was written in the previous month and appeared on the previous...
Sales before deducting sales returns, sales allowances, and sales discounts.
What is bad debts? Definition of Bad Debts The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected. (Bad debts is also used for notes receivable that will not be...
The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
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