The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
Usually a permanently restricted asset for which the principal portion must be retained indefinitely. The earnings from an endowment fund could be unrestricted or temporarily restricted.
A diagram depicting a company’s hierarchy or chain of command, its business segments, functions, and departments.
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
See mixed expenses.
An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
An individual owner of a business that is not incorporated.
Current assets minus current liabilities.
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
Free on Board. See FOB destination and FOB shipping point.
See job order costing.
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
A department that is directly involved in manufacturing products. Examples are the machining, finishing, and assembling departments.
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
What is FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act. FICA consists of the U.S. Social Security payroll tax and the Medicare payroll tax. The FICA payroll tax is withheld from...
An actual count of the goods owned by the business.
See accrued payroll.
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
What is the difference between loan interest and bank loan repayment? Definition of Loan Interest Loan interest is the expense a borrower incurs for using a lender’s money. Loan interest is also the income earned by a...
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
See accrual-type adjusting entry.
Someone who has granted credit. If a bank lends a company money, the bank is a creditor. If a supplier sold merchandise to a company on credit, the supplier is a creditor.
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
Financial Executives Institute.
An actual count of the goods owned by the company. The actual counts are then compared to the quantities reported on the detailed inventory records. If a difference exists, the quantity shown on the inventory record...
What is a vendor? Definition of Vendor In the context of accounts payable, a vendor is a person or business that supplies goods or services to the company. Another term for vendor is supplier. The term vendor can also be...
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
What is the journal entry to record a one-year subscription for a magazine? Ways to Record One-Year Subscriptions Let’s assume that the cost of the one-year subscription for a monthly trade publication is $120. Let’s...
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...
The person or business that receives a loan from a bank or other lender.
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...
What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
What is a transposition error? Definition of Transposition Error A transposition error occurs when an amount is recorded incorrectly as the result of switching the positions of two (or more) digits. The switching of the...
To receive money in exchange for a promise to repay the amount to the lender.
To learn more, see Explanation of Depreciation.
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