A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
See program evaluation and review technique (PERT).
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
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...
Billing a client based on the value of the information or service provided rather than billing based on time spent.
One of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities,...
See temporary accounts.
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
A request by the petty cash custodian for a company check in order to return the amount of currency and coins in the petty cash box to the amount shown in the general ledger account.
The contra owner’s equity account that reports the amount of withdrawals of business cash or other assets by the owner for personal use during the current accounting year. At the end of the accounting year, the...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
See uncleared check.
If a mortgage payment is due by December 31, but the payment is not made until the following month, should the loan payment be accrued at December 31? The interest portion of the mortgage payment should be accrued as of...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
An internal accounting report that is prepared prior to recording the adjusting entries. Its purpose is to verify that the total amount of debit balances in the general ledger accounts is equal to the total amount of...
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.
A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
See fixed manufacturing overhead volume variance.
See freight-in.
The stockholders’ equity account that reports the par or stated value of the issued shares of common stock. If the common stock does not have a par or stated value, this account will report the amount received when...
Asset, liability, and owner’s equity accounts. Also referred to as permanent or real accounts. To learn more, see Explanation of Balance Sheet.
A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
The statement of the Financial Accounting Standards Board entitled Financial Statements of Not-for-Profit Organizations. This statement was originally issued in June 1993 and can be read at no cost at www.FASB.org.
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
See discounted cash flow model.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
This classification of net assets has been replaced by the FASB with the classification net asset with donor restrictions.
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
A document that discloses various conditions and terms of the company’s bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
What are sales taxes? In the United States, most of its 50 States assess a sales tax, which is a tax on sales to the end user. For example, in the state of Wisconsin a retailer must collect a 5% sales tax and perhaps...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
See net operating income (NOI).
Also referred to as a sunk cost. A past cost is not relevant to a decision.
A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
Is the drawing account a capital account? Definition of Drawing Account A sole proprietorship will have a drawing account in which the owner’s withdrawals or draws of cash or other assets are recorded. The amounts of...
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