Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
Also known as freight-out or as delivery expense. This is an operating expense further classified as a selling expense. It results when merchandise is sold with terms of FOB destination.
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...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
Corporations whose stock is traded on stock exchanges. Also referred to as publicly-traded corporations.
A situation where there is correlation between the independent variables used in explaining the change in a dependent variable. When this condition exists, you cannot have confidence in the individual coefficients of the...
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
What is equity? Definitions and Examples of Equity Equity has several definitions that pertain to accounting: Equity can indicate an ownership interest in a business, such as stockholders’ equity or owner’s equity....
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
See functional and natural matrix.
The borrower who provides to a lender an asset as collateral for a loan.
See notes to financial statements.
The day after the record date for a cash dividend on shares of stock. Theoretically, the market price of the stock should drop on this day by the amount of the dividend.
The symbol that represents the total cost in the equation of the cost line y = a + bx.
One of the types of donor-imposed temporary restrictions. An example of a purpose restriction is a cash donation with a donor-imposed requirement that the money be used only to purchase a vehicle for one of its programs....
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
A graph’s horizontal base which indicates the total number of units or other units of volume or activity for the amounts indicated by the y-axis.
Manufacturing costs other than direct materials and direct labor. To learn more about manufacturing overhead, see our Manufacturing Overhead Outline.
The lender (bank) that receives an asset as collateral for a loan.
See equivalent units of production.
An asset’s cost that has been assigned to Depreciation Expense.
What is the cost of capital? Definition of Cost of Capital The cost of capital is the weighted-average, after-tax cost of a corporation’s long-term debt, preferred stock (if any), and the stockholders’ equity...
A corporation has a large balance in retained earnings. Does that mean that its dividends to stockholders will be increasing? Definition of Retained Earnings Retained earnings is one part of a corporation’s...
What are capital expenditures? Definition of Capital Expenditures Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
What is a favorable variance? Definition of a Variance In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company’s budget for...
See absorption costing.
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
The Roman numeral that represents 1000. Other symbols that are sometimes used to represent 1000 include k and m. (Note: Sometimes M is also used to indicate million.)
What is a natural business year? Definition of Natural Business Year A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of the organization’s activities...
See phantom profits.
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
An amount that should be charged to the current accounting period as an expense.
A quality of accounting information that facilitates the comparison of financial reporting of one company to the financial reporting of another company.
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
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...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
See inventory: work-in-process (WIP).
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