See separation of duties.
See separation of duties.
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
See electronic funds transfer.
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
Free Alongside Ship. Terms indicating that the seller’s price includes delivery of goods at a ship’s pier. Title to the goods will transfer to the buyer alongside the ship.
How do the income statements of a sole proprietorship and a regular corporation differ? Definition of Income Statements of Sole Proprietorship and Regular Corporation The income statement of a sole proprietorship and a...
In accounting this is the rate used to discount future cash flows in order to determine their present value.
Current assets minus current liabilities.
What is opportunity cost? Definition of Opportunity Cost Opportunity cost is the profit that was lost or missed because of some action or failure to take some action. Some refer to opportunity cost as opportunity lost....
What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
See inventory: finished goods (FG).
Free on Board. See FOB destination and FOB shipping point.
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
Financial Executives Institute.
A formal written promise to pay interest every six months and the principal amount at maturity.
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
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...
A loan having the security of a lien on the borrower’s real estate.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
See fixed expenses.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
The Roman numerals that indicate 1,000,000.
The increase in a carrying amount. Also see write-up work.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
Segments of a business. For example, a corporation may have a consumer division and an industrial division in order to improve its effectiveness in marketing its goods.
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
See Explanation of Financial Ratios.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
Life insurance without a cash value.
The cost of the next unit.
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
Revenue that has been earned but not yet invoiced to the customer.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
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