A situation where there is correlation between the independent variables used in explaining the change in a dependent variable. When this condition exists, you cannot have confidence in the individual coefficients of the...
A situation where there is correlation between the independent variables used in explaining the change in a dependent variable. When this condition exists, you cannot have confidence in the individual coefficients of the...
U.S. social security system.
Also referred to as footnotes. These provide additional information pertaining to a company’s operations and financial position and are considered to be an integral part of the financial statements. The notes are...
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
Under this method, net income is determined by analyzing the change in owner’s equity. The alternative is the transaction approach in which each transaction is recorded, sorted and stored.
Financial statements based upon various assumptions.
See exchange of similar nonmonetary assets.
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.
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
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 income statement. To learn more, see Explanation of Income Statement.
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
The stated legal amount appearing on bonds.
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.
See inventory: work-in-process (WIP).
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
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...
Federal Unemployment Tax Act. See federal unemployment tax.
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
The exchange or trade-in of a long-term asset for a completely different long-term asset. For example, exchanging an antique car for land.
A revenues account with a debit balance instead of the usual credit balance. Examples include sales returns, sales allowances, and sales discounts.
See units of production method of depreciation.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
A balance sheet line to report short-term assets that are too insignificant to be identified separately.
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
Asset, liability, and owner’s equity accounts. Also referred to as permanent or real accounts. To learn more, see Explanation of Balance Sheet.
The general ledger account Cash that reports currency, coins, undeposited checks, and the checking accounts of a company. (Could also be a reference to a customer required to pay cash for purchases.)
A temporary holding place for amounts that need further analysis.
The basic general rules upon which more detailed accounting standards are built. To learn more, see Explanation of Accounting Principles.
Receivables other than Accounts Receivable. Examples include amounts due from employees and income tax refunds receivable.
An asset account which reports the carrying amount of a company’s investment in another enterprise.
Often a liability representing the differences between the income tax expense associated with the revenues and expenses reported on a corporation’s income statements and the actual income tax appearing on the...
Bonds with one maturity date (as opposed to serial bond).
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
This is an administrative expense which reports the fees incurred by a company for the expenses associated with its checking account transactions.
An income statement account for expense items that are too insignificant to have their own separate general ledger accounts.
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
This current liability account reports the amount of interest the company owes as of the date of the balance sheet. (Future interest is not recorded as a liability.)
Federal government securities with a fixed interest rate and maturing in more than 10 years.
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