A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
In the EOQ model, order costs are the incremental costs of processing an order of goods from a supplier. Examples of order costs include the costs of preparing a requisition, a purchase order, and a receiving ticket,...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s 401(k) plan associated with the employees in the warehouse department during the period indicated in the...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
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Under the accrual method of accounting, the account Unemployment Tax Expense on Warehouse reports the unemployment tax expense the company has incurred for the employees in the warehouse during the period indicated in...
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
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Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as “take home pay” or the amount the employee...
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
Under the accrual method of accounting, this account reports the amount of wages that the delivery employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for...
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
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The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
Accounts that have some restrictions. For example, an investment account and a cash account might be restricted for the construction of a new factory. The restrictions mean that these accounts be reported as a long-term...
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
A professional certification awarded to an accountant who has successfully completed the CMA Exam and has achieved the required work experience. The certified management accountant is recognized as a person with a strong...
Beginning in 2018, this is one of two classifications of net assets reported on the financial statements of a not-for-profit organization’s financial statements. This classification replaces the previous...
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...
The systematic allocation of the premium on bonds payable (reported as a credit in a liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize the premium contains a debit to...
A subgroup of a nonprofit’s supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and...
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
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...
One of the steps in effective internal control. An example of separation of duties is to have the money handling be performed by someone who does not update the records. This means that the money counters at a church...
A multicolumn listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of...
The independent organization based in the UK which develops the International Financial Reporting Standards (IFRS). The IASB has been working with the Financial Accounting Standards Board (FASB), which is based in the...
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This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
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