What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
See job order cost sheet.
See net realizable value.
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
See sum of the years’ digits method of depreciation.
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
What are byproducts? Byproducts, or by-products, are products with relatively little value that emerge from a common process along with the main products. The main products have significant value and are referred to as...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
A highly summarized income statement
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The “bottom line” on the statement of activities. The change in net assets results from revenues, expenses, and the release of assets from restrictions. It is computed for an organization’s three...
The amount an employee “clears” on her or his payroll check. It is also the “net” amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
This term is often associated with an investment in the bonds issued by another corporation if the bonds are traded on a bond exchange.
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
Bookkeeping Video Training Part 9 Adjusting entries: depreciation expense and accumulated depreciation reported on financial statements, useful life of the asset Must-Watch Video Learn How to Advance Your Accounting and...
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
What is the debt to equity ratio? Definition of Debt to Equity Ratio The debt to equity ratio or debt-equity ratio is the result of dividing a corporation’s total liabilities by the total amount of stockholders’...
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
One of the financial statements issued by a nonprofit organization which reports expenses according to both function and nature. Learn more about Nonprofit Accounting.
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
A top ranking corporation official usually reporting to the chief executive officer and responsible for the operations of the corporation.
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...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
See Explanation of Bank Reconciliation.
Beginning in 2018, this is one of two classifications of net assets reported on the financial statements of a not-for-profit organization’s financial statements. This classification is to be used instead of the...
Sorting and reporting expenses according to the type of activity for which the expense was incurred. The functional expense classifications for a nonprofit organization would be Program #1, Program #2, Management and...
A management tool that identifies the critical path—the path of sequential activities requiring the longest time to complete.
See dividends in arrears.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
A variance arising in a standard costing system that indicates the difference between the actual amount of fixed manufacturing overhead incurred and the budgeted amount of fixed manufacturing overhead. To learn more, see...
See first in, first out (FIFO).
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
Featured Review
"With the resources available through AccountingCoach, I was able to learn many of the fundamentals about accounting and bookkeeping without any prior background. With the wealth of knowledge provided by AccountingCoach at my back, I've been able to take over all accounting functions for a $5M company after less than a year. I used other resources as well, but couldn't have done it without the firm base established by my time studying AccountingCoach." - Nick B.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: