a responsibility to deliver what it offered to the customer, but there is no double-entry business transaction to be recorded at the time that the order is received. Join PRO to Track Progress Mark the Question as Read...
a responsibility to deliver what it offered to the customer, but there is no double-entry business transaction to be recorded at the time that the order is received. Join PRO to Track Progress Mark the Question as Read...
What are the effects of depreciation? Definition of Depreciation Depreciation is the systematic allocation of the cost of a company’s assets used in its business from the balance sheet to the income statement (as an...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
, it is wise for a company to use some debt to control a larger amount of profitable assets. However, too much debt can mean significant risk when business conditions decline. Leverage is also known as trading on equity....
What is the monthly close? Definition of Monthly Close In accounting, monthly close is a series of steps and procedures that are followed so that a company’s monthly financial statements are in compliance with the...
of Property, Plant and Equipment Typical assets that are included in property, plant and equipment are land, buildings, machinery, equipment, vehicles, furniture, fixtures, office equipment, etc. which are used in the...
What are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
, you will need an aptitude for accounting and business in order to master the complex material included on the CPA Exam. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
Why is interest expense a nonoperating expense? Definition of Interest Expense as a Nonoperating Expense Interest expense is the cost of borrowing money. For most companies the borrowing of money is not part of their...
What is disinvestment? In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital...
If a company earns a profit, which balance sheet items change? Definition of Profit Profit is the result of revenues minus expenses. How Profits Change the Balance Sheet Since all business transactions affect at least...
What is ERP? Definition of ERP In accounting, ERP is the acronym for enterprise resource planning. ERP could be described as a database software package that supports all of a business’s processes and operations...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
are contained in the general ledger and are used to sort and store transaction amounts. Mark as wrong Mark as right double entry This system requires that every business transaction must affect at least two general...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
A right to buy a specific number of shares of stock at a specific price by a specific date.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
The owner of property that often receives rent from tenants.
Accounts receivable that serve as the collateral for a loan.
A written opinion of an independent certified public accountant that a company’s financial statements are a fair representation of the company’s financial performance and financial position. The...
Also referred to as shareholders’ equity. At a corporation it is the residual or difference of assets minus liabilities. To learn more about stockholders’ equity, see our Stockholders’ Equity Outline.
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
The book value of a company equal to the recorded amounts of assets minus the recorded amounts of liabilities. To learn more, see Explanation of Balance Sheet.
This loss is not an extraordinary item, since it is not unusual in nature. However, it can appear as a separate line item in the main portion of the income statement. It will be reported at its gross amount (not net of...
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
A corporation’s net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).
To enter an amount on the right side of an account. Normal entries to revenue accounts are credits. Liabilities normally have credit balances. To learn more about debits and credits, see our Debits and Credits Outline.
A heading that includes common stock and preferred stock.
The party owning an asset and receiving rent from another party (the lessee).
An expectation that as a task is repeated there will be significant time reductions during the early repetitions. The time savings will dissipate after continuous performance. This is important to consider when setting...
Repairs that do not improve an asset or extend the asset’s life. These repairs are charged to Repairs Expense or Maintenance Expense when incurred. Major repairs such as a complete engine overhaul that extends the...
A weighted average cost used with the periodic inventory system. To learn more, see Explanation of Inventory and Cost of Goods Sold.
A word that means to add a column of numbers as in “Foot the amounts listed in column A.” Also see crossfoot.
Net sales revenues minus the cost of goods sold.
Sending work to another organization instead of processing the work in-house. Often payroll is outsourced to a company that specializes in payroll processing.
Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine...
Featured Review
"Just had to write & say how much I love AccountingCoach and love being a PRO member! Love reading the material because the explanations are so clear and helpful. Years ago, I took a course at two different 2-year colleges, and I remember being frustrated and agonizing over how confusing and unclear both courses were to me. Having AccountingCoach's material to study heals the frustration and confusion and brings me hope and peace, and joy! Truly! I refer people to your site as much as possible knowing they'll be benefiting and very grateful. This is Education at its finest!" - 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: