This is an operating expense resulting from making sales on credit and not collecting the customers’ entire accounts receivable balances.
This is an operating expense resulting from making sales on credit and not collecting the customers’ entire accounts receivable balances.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
Dollars of gross profit divided by the dollars of net sales. Also known as gross margin.
The term that refers to the stock of a corporation which is traded on the stock exchanges (as opposed to stock that is privately held among a few individuals).
The products with significant value that emerge at a split-off point in a process. When a joint product has little value it is referred to as a by-product.
A general ledger account which serves to summarize similar transactions. For example, all of the closing entries involving operating expenses might be posted to an operating expense clearing (or summary) account.
See direct materials usage variance.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
A term used to describe checks written by a company that have been received and paid by the bank on which they were drawn or written. The check number and amount will appear on the company’s checking account...
A balance sheet which is a projection of the amounts at a future date. It should be based on the projected, budgeted transactions.
The amount of owner’s equity or stockholders’ equity reported on a company’s balance sheet. This is not an indication of the company’s fair market value.
The internal growth of a company’s existing businesses. Organic growth excludes the additional sales resulting from acquiring another company.
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
The party receiving goods to be sold. See consigned goods.
See income statement. To learn more, see Explanation of Income Statement.
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The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
In accounting this is the rate used to discount future cash flows in order to determine their present value.
The compensation earned by employees who are paid on an hourly basis. It is common for production workers to earn wages, since they are usually paid via an hourly rate.
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined...
The expense incurred during the time interval indicated on the income statement for using rented equipment.
Receivables due from customers. See accounts receivable.
The indirect manufacturing costs that will change in proportion to the change in an activity such as machine hours. For example, a portion of a manufacturer’s electricity cost will vary with the change in the...
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Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
See first in, first out (FIFO).
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.
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
A special or specialized journal to record sales of merchandise to customers. In a manual system this saves a significant amount of recording time. In today’s computerized environment, sales are recorded...
A financial statement that reported the changes in a company’s working capital. The funds flow statement has been replaced by the statement of cash flows.
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