Expenses which do not change in response to reasonable changes in sales or other activity.
Expenses which do not change in response to reasonable changes in sales or other activity.
A mathematical tool to optimize profits (contribution margin) given a limited amount of inputs and other constraints.
See Public Company Accounting Oversight Board (PCAOB).
See Explanation of Standard Costing.
What is the difference between assets and fixed assets? Assets are resources owned by a company as the result of transactions. Examples of assets are cash, accounts receivable, inventory, prepaid insurance, land,...
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
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.
The benefit foregone by choosing another course of action. Also known as the opportunity cost. The lost opportunity is sometimes measured by the lost contribution margin (sales minus the related variable costs).
Usually a permanently restricted asset for which the principal portion must be retained indefinitely. The earnings from an endowment fund could be unrestricted or temporarily restricted.
The increase in a carrying amount. Also see write-up work.
See Financial Accounting Standards Board.
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
What is materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
What is an ordinary annuity? Definition of Ordinary Annuity In accounting, an ordinary annuity refers to a series of identical cash amounts with each amount occurring at the end of equal time intervals. Another term for...
See notes to financial statements.
A company might construct a building and then sell the building to an investor who in turn leases the building back to the company.
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
The underlying true cause of a cost occurring. In other words, the root cause is more than a mere correlation between an event and a cost. There is a real cause and effect relationship.
See long-term assets.
In financial accounting this term refers to the amount of debt excluding interest. Payments on mortgage loans usually require monthly payments of principal and interest.
A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
See inventory: finished goods (FG).
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’.
The collection of money (currency, coins, checks). Not to be confused with revenues.
See net present value.
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...
The statistic known as the coefficient of correlation. The range of this statistic is -1 to +1. When this statistic is squared the result is the percentage change in the dependent variable y that is explained by the...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
An asset which serves as collateral for a loan.
A document that discloses important information on bonds or preferred stock. Included in the indenture would be the call price, the actions that can occur if the company fails to pay the interest or dividend, etc.
What is the abbreviation for debit and credit? Abbreviation for Debit and Credit The abbreviation for debit is dr. and the abbreviation for credit is cr. Apparently the “dr.” is associated with the term used in Italy...
An official pronouncement by the Financial Accounting Standards Board that involves a previously issued FASB Standard. FASB Interpretations are part of the generally accepted accounting principles.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
The amount by which actual costs exceed the standard costs or budgeted costs. Also, the amount by which actual revenues are less than the budgeted revenues.
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...
Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as “take home pay” or the amount the employee...
In accounting this word is often included in the title of liability accounts. It means the amount owed by a company as of the balance sheet date, even if the company did not yet receive an invoice from the supplier. For...
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