A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
What is cash from operating activities? Definition of Cash from Operating Activities Cash from operating activities usually refers to the first section of the statement of cash flows. Cash from operating activities...
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...
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
What is a journal? Definition of a Journal In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry. The...
An invoice or other document received from a vendor, supplier, etc. usually for goods or services received. Also a verb to indicate that a customer’s sales invoice should be prepared for goods or services.
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
See deferred expense.
The date that determines which stockholders are entitled to receive a corporation’s declared dividend. No accounting entry is made on this date.
See outstanding checks.
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
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...
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
A current asset that reports the amount paid for advertising that has not yet taken place. When the advertising occurs the prepaid advertising is reduced and advertising expense is recorded.
In financial accounting this term refers to the amount of debt excluding interest. Payments on mortgage loans usually require monthly payments of principal and interest.
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
A bond with collateral.
Usually used in describing fixed costs. We often state that fixed costs will not change as volume changes. However, if volume were to triple, there would likely be more fixed costs as the company will need more space and...
A phrase used in standard costing. The production that is acceptable (not rejected products) and which is assigned manufacturing costs of direct materials, direct labor, and manufacturing overhead.
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
The result of subtracting total liabilities from total assets. It is also the term used by not-for-profit organizations instead of owner’s equity or stockholders’ equity. To learn more see our Explanation of...
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
The ability to generate cash.
Is a prepaid expense recorded initially as an expense? Definition of Prepaid Expense A prepaid expense refers to an amount that a company has paid and a portion or all of it will be an expense in a later accounting...
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
Manufactured products that are often expressed in units, machine hours, etc.
The statements, standards, interpretations and other financial reporting guidelines issued by the Financial Accounting Standards Board. The FASB pronouncements are available at www.FASB.org.
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
Usually the difference between the cost of inventory at LIFO versus the cost of inventory at FIFO.
See accelerated depreciation.
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
Also referred to as a “p.o.” A multi-copy form prepared by the company that is ordering goods. The form will specify the items being ordered, the quantity, price, and terms. One copy is sent to the vendor...
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
A budget that flexes with volume. Under a flexible budget the budgeted amount of manufacturing overhead will increase if the company produces more units than planned. The flexible budget will decrease if the company...
See earnings per share.
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