A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
The amount of owner’s equity or stockholders’ equity reported on a company’s balance sheet. This is not an indication of the company’s fair market value.
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
A record of the details to support a general ledger account. The general ledger account is often referred to as the control account. For example, the accounts receivable subsidiary ledger provides the details to support...
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
Bookkeeping Video Training Part 9 Adjusting entries: depreciation expense and accumulated depreciation reported on financial statements, useful life of the asset Must-Watch Video Learn How to Advance Your Accounting and...
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...
This term is associated with preferred stock that does not allow its holders to receive more than its stated dividend. The nonparticipating feature is typical in preferred stock. To learn more about preferred stock, see...
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...
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
A balance sheet which is a projection of the amounts at a future date. It should be based on the projected, budgeted transactions.
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
See next-in, first-out cost flow assumption (NIFO).
A right to buy a specific number of shares of stock at a specific price by a specific date.
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
This current liability account reports the amount a company owes the state and federal governments as of the balance sheet date for the employer’s unemployment tax based on the governments’ rates and the...
A fee for the printing of checks ordered by a company. Often the amount is deducted automatically from a company’s checking account by the company that printed the checks.
This current liability account reports the amount a company’s employees have earned in holiday pay, vacation pay, and sick days but have not yet taken as of the date of the balance sheet.
Also referred to as the useful life. This differs from the physical life of an asset. For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
A division or department of a business whose managers are responsible for both revenues and expenses.
The amount of cash that could be received if a whole life insurance policy were canceled.
Receivables due from customers. See accounts receivable.
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
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...
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
The discounted value of a series of equal amounts occurring at future points with equal time intervals.
Financial statements that bear the report of independent auditors attesting to the financial statements’ fairness and compliance with generally accepted accounting principles.
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
A word to describe whether a company is able to earn more revenues than expenses.
An asset’s cost that has been assigned to Depreciation Expense.
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
One hundredth (1/100) of a percentage point. In other words, one percentage point is equal to 100 basis points. The difference between an interest rate of 6.5% and 6.75% is 25 basis points.
See Public Company Accounting Oversight Board (PCAOB).
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