An amount that should be charged to the current accounting period as an expense.
An amount that should be charged to the current accounting period as an expense.
This term is often associated with an investment in the common stock (and/or preferred stock) of a corporation when the stock is publicly traded.
A department within a factory that does not directly produce a product. Examples are the factory maintenance department, factory administrative department, and quality assurance department.
See generally accepted accounting principles (GAAP).
See phantom profits.
A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the...
Why is a negative cash balance reported as a liability? The following will illustrate why a negative cash balance is reported as a liability instead of being reported as a negative asset amount. Company X writes checks...
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
In regression analysis this is a statistic (designated as r-squared) indicating the percentage of the change occurring in the dependent variable that is explained by the change in the independent variable(s). The percent...
Amounts spent for property, plant and equipment.
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
A liability account on the books of a company receiving cash in advance of delivering goods or services to the customer. The entry on the books of the company at the time the money is received in advance is a debit to...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
The annual report to the Securities and Exchange Commission (SEC), a U.S. government agency. The Form 10-K must be filed by corporations whose stock is publicly-traded on a U.S. stock exchange. The report contains the...
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
A contra liability account containing the amount of discount on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
A cash dividend that has been declared by the board of directors, but not yet paid.
See cost of goods sold.
The compensation earned by employees who are paid on an hourly basis. It is common for production workers to earn wages, since they are usually paid via an hourly rate.
See job order cost sheet.
In accounting this is the rate used to discount future cash flows in order to determine their present value.
An employee that must be paid overtime pay when the employee’s weekly hours exceed 40 hours. Some states may have additional requirements. Nonexempt employees include both hourly-paid and salary-paid who are not...
See sum of the years’ digits method of depreciation.
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
A restricted asset for the purpose of retiring a bond.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
See deferred expense.
The amount that a recurring equal amount deposited at the beginning of each period will grow to under compounded interest. An annuity due is also known as an annuity in advance.
The estimated scrap value at the end of the useful life of an asset used in the business. It is also referred to as residual value.
A second retained earnings account that reports the amount that a company has transferred from the unappropriated or regular retained earnings account.
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...
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.
What is the purpose of depreciation? Purpose of Depreciation The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
See freight-in.
Featured Review
"I am very appreciative of AccountingCoach.com. I believe that Harold Averkamp, CPA, MBA, deserves to receive a special award for his philanthropic dedication to educating people about accounting. I try to spread the word as much as possible because this website is truly a wonderful opportunity to learn bookkeeping and accounting. And it is FREE. Plus you get the opportunity for lots of material for a very small amount of money. And there are great videos & quizzes, too. I am grateful that I have had the opportunity to study at AccountingCoach.com. Whenever I am talking with just about anyone I refer them to AccountingCoach.com. Honestly, this is the best website to learn a valuable skill with the added plus of no debt in the process, using the least amount of money, zero gasoline, zero transportation time/energy, no frustration and having the finest teacher one could hope to be learning from, i.e., Mr. Harold Averkamp, CPA, MBA." - Carol S.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: