Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
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...
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
A trademark associated with a service rather than a product.
If a mortgage payment is due on January 1, should the payment be accrued at December 31? The following answer assumes that the accrual basis of accounting (also known as the accrual method of accounting) is being used…...
The difference between the actual amount and the budgeted amount.
Free Alongside Ship. Terms indicating that the seller’s price includes delivery of goods at a ship’s pier. Title to the goods will transfer to the buyer alongside the ship.
An income statement with at least two columns of amounts. The column of amounts that is closest to the words will contain the amounts for the most recent period of time. The columns furthest from the words will be the...
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
A person who is considered to be both the employer and the employee. For example, the sole owner of a sole proprietorship is self-employed.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
Another word for purchasing.
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
A budget that does not flex for changes in volume or activity.
Taxes assessed by states to cover unemployment benefits paid to unemployed workers who have been laid off or terminated by a company for specified reasons. This tax is paid by the employer but is computed by multiplying...
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
A projection or estimate of the future quantities and selling prices of products and/or services.
A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
The regular retained earnings. Retained earnings that have not been restricted.
A balance sheet which is a projection of the amounts at a future date. It should be based on the projected, budgeted transactions.
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
Contributions collected by Charity #1 who is merely acting as a collection agent for Charity #2. Also known as flow-through contributions.
An invoice or other document received from a vendor, supplier, etc. usually for goods or services received. Also a verb to indicate that a customer’s sales invoice should be prepared for goods or services.
Raw materials that are a traceable component of a manufactured product. For example, the direct material of a baseball bat is the wood. Flour, sugar, and vegetable oil are direct materials of a company that manufactures...
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
Bookkeeping Video Training Part 12 Bank reconciliation: process to determine the true or adjusted amount of cash, journal entries needed for adjustments to book balance Must-Watch Video Learn How to Advance Your...
A financial ratio that compares a company’s interest expense to the company’s income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
The total of interest and principal payments required to be paid on loans payable.
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
See yield to maturity.
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.
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