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 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...
A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...
The actual cost incurred for manufacturing costs that does not change as production volume changes. Examples include the property tax, rent, and depreciation of the factory building and equipment, and the salaries of the...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
Federal government securities with a fixed interest rate and maturing in more than 10 years.
See direct materials usage variance.
The discounted value of a series of equal amounts occurring at the end of each equal time interval. To learn more, see our Present Value of an Ordinary Annuity Outline.
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...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
Same as the Days Sales in Accounts Receivable
What is the difference between fixed assets and noncurrent assets? Fixed Assets are Part of Noncurrent Assets Fixed assets are one of several categories of noncurrent assets. Fixed assets are usually reported on the...
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
What is depletion? Definition of Depletion In accounting, depletion refers to the expensing of a company’s cost of a natural resource. Ultimately, it means moving a natural resource’s cost from the company’s...
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
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...
Under accrual accounting it is the rent earned during the period indicated in the heading of the income statement, regardless of when the money is received from the tenant.
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...
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
One of the amounts used in determining the amount of interest to be capitalized when a company self-constructs certain long-term assets.
Why are loan costs amortized? Definition of Loan Costs Loan costs may include legal and accounting fees, registration fees, appraisal fees, processing fees, etc. that were necessary costs in order to obtain a loan. If...
The amount of office supplies used during a specified time interval.
A variance arising in a standard costing system that indicates the difference between the actual variable manufacturing costs incurred and the expected variable manufacturing overhead costs based on some activity such as...
A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
What is the debt to equity ratio? Definition of Debt to Equity Ratio The debt to equity ratio or debt-equity ratio is the result of dividing a corporation’s total liabilities by the total amount of stockholders’...
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of the bond’s face amount.
Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
See units of production method of depreciation.
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
A phrase used in reconciling the bank statement. It refers to the ending balance shown on the bank statement.
What is the purpose of the cash flow statement? Definition of Cash Flow Statement The cash flow statement or statement of cash flows or SCF identifies a company’s major cash inflows and outflows that occurred the same...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
The fixed manufacturing costs (e.g., property tax, rent, and depreciation on factory) that have been assigned to (absorbed by) the products manufactured via a predetermined rate. Ideally, by the end of the accounting...
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