The person or business that receives a loan from a bank or other lender.
The person or business that receives a loan from a bank or other lender.
A reference to stockholders’ equity. See paid-in capital. Also an adjective that references property, plant and equipment used in a business; for example, capital expenditures and capital budgeting.
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
A division or department of a business whose managers are responsible for both revenues and expenses.
The withdrawal of business cash or other assets by the owner for the personal use of the owner. Withdrawals of cash by the owner are recorded with a debit to the owner’s drawing account and a credit to the cash...
A diagram depicting a company’s hierarchy or chain of command, its business segments, functions, and departments.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
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.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
The balance in a business record such as a general ledger account.
A person or business that has a checking account or savings account at a bank.
An accounting principle/guideline that allows the accountant to keep the sole proprietor’s business transactions separate from the owner’s personal transactions even though a sole proprietorship is not...
The amount by which the proceeds from the sale of equipment (that had been used in the business) exceeded its carrying amount at the time it is sold.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
The amount by which the proceeds from the sale of an automobile used in the business exceeded its carrying amount at the time it is sold.
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
Also referred to as peripheral activities. A company’s activities outside of its main activities of buying/producing and selling. Examples include a retailer’s financing function involving interest revenue...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
A long term asset account containing the cost of delivery equipment acquired by a company and used in its business. The account will appear on the balance sheet under the heading of Property, Plant and Equipment. There...
What is a common carrier? A common carrier is a business that transports goods for other companies, organizations, or individuals. The common carrier is responsible for any loss associated with the transport of the...
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...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
A detailed plan with dollar amounts. Examples of budgets used in business include the cash budget, sales budget, production budget, department budgets, the master budget, and the capital expenditures budget. Some budgets...
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...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
on the Balance Sheet Assume that you own and operate a sole proprietorship. You provided a service to a client and earned revenues of $900 and had no expenses. One of the business assets (cash or accounts receivable)...
expense during the years that the asset is used in the business. Salvage value is also referred to as disposal value, residual value, or scrap value. Example of Asset Salvage Value Perhaps the most common calculation of...
% on its last increment of income. If this corporation spends an additional $10,000 for a tax deductible business expense, its taxable income will decrease by $10,000. This means that the corporation will save paying...
is a term commonly used to describe a company selling parts of its business for cash, selling its assets in order to pay debts, or the process of winding down or closing a business. Join PRO to Track Progress Mark the...
in a business. They are reported in the Property, Plant and Equipment section of the balance sheet. The fixed/plant assets are depreciated over their estimated useful lives (except for land which is not...
income. However, there are two noteworthy differences: The income statement of the sole proprietorship does not report as an expense any salary or wages for the owner working in the business. However, the regular...
decreases. Examples of Variable Expenses Assume that a website business sells a product and requires the customer to pay with a credit card. The credit card processor charges the business a fee of 3% of each amount...
, if gross sales are 990 and sales returns are 10, sales allowances are 5, and sales discounts 20, the net sales are 955 (990 minus 35). Here are some additional examples of net: net realizable value. The amount to be...
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