Relevant or meaningful data.
Relevant or meaningful data.
The additional revenues from an additional quantity. It is similar to marginal revenue, except that marginal revenue refers to the revenue from the next unit. Incremental revenue might be the additional revenues from the...
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.
A bill issued by a seller of merchandise or by the provider of services. The seller refers to the invoice as a sales invoice and the buyer refers to the same invoice as a vendor invoice.
Usually the pay for the hours worked in excess of 40 hours per week. Federal laws require payment for these hours for employees who are not able to control their hours. For example, a company is required to pay a...
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
See external financial reporting.
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
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.
See inventory shrinkage.
See Explanation of Standard Costing.
The last-in, first-out cost flow assumption under the perpetual inventory system. The last (most recent) costs as of the time that goods are sold are the first costs removed from inventory. The oldest costs as of the...
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
The current asset that represents the amount of interest revenue that was reported as earned, but has not yet been received.
A loss that occurs by holding an asset. Holding losses might be recorded on the income statement or they might not be recorded depending on the asset and the amounts.
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
What is a source document? Definition of Source Document A source document is an original record which contains the detail that supports or substantiates a transaction that will be (or has been) entered in an accounting...
See just-in-time (JIT).
Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
An individual owner of a business that is not incorporated.
The amounts withheld for employees’ checks for Social Security tax, Medicare tax, federal income tax, state income tax, and voluntary deductions such as United Way, union dues, 401(k) contributions,...
Goods placed with another party without transferring ownership. See consigned goods.
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
Verifiable, objective (not subjective), and you can depend on it.
An employee’s pretax compensation that is based on annual or monthly amounts rather than an hourly rate. Management employees are usually paid salaries. To learn more, see Explanation of Payroll Accounting.
In the equation of a straight line, y = a + bx, ‘bx’ is the total variable cost resulting from the variable cost rate ‘b’ multiplied times the quantity ‘x’.
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
A symbol that represents 1000.
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
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...
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
A budget that does not flex for changes in volume or activity.
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