To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
The date on which the board of directors of a corporation declares a dividend on the corporation’s stock. On this date an accounting entry is made to debit Retained Earnings and to credit Dividends Payable.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
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 The funds flow statement has been replaced by the statement of cash flows.
The term associated with payroll deductions from an employee’s gross wages or gross salary.
A graph’s horizontal base which indicates the total number of units or other units of volume or activity for the amounts indicated by the y-axis.
An asset’s cost that has been assigned to Depreciation Expense.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
A corporation’s reported net income and earnings per share for a three-month period.
A directive to a company’s bank to not honor (pay) a specific check that the company had written. The company making the request will be charged a fee by the bank for this service.
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
The internal growth of a company’s existing businesses. Organic growth excludes the additional sales resulting from acquiring another company.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
Total liabilities divided by total assets. This indicates how much of a corporation’s assets are financed by lenders/creditors as opposed to purchased with owners’ or stockholders’ funds. If a high...
A term to mean the company’s general ledger or accounting records.
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...
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
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...
A loan having the security of a lien on the borrower’s real estate.
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.
A document that discloses various conditions and terms of the company’s bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
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 corporation’s total stockholders’ equity (excluding preferred stock) divided by the number of shares of common stock outstanding.
A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of the bond’s face amount.
Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
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