The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
The time from when goods are ordered until the time when the goods are received.
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
Sending merchandise to another party (an agent, consignee) in order to sell the merchandise. Also see consigned goods.
The difference between the actual amount and the budgeted amount.
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
Cash received. Receipts are different from revenues.
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 term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
The additional cost of an additional quantity. It is similar to marginal cost, except that marginal cost refers to the cost of the next unit. Incremental cost might be the additional cost from the next 200 units.
Usually financial statements refer to the balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholders’ equity. The balance sheet reports information as of...
See cost of goods sold.
See carrying amount.
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...
Support that has been either temporarily or permanently restricted by the donor.
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
A word to describe whether a company is able to earn more revenues than expenses.
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
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 result of subtracting total liabilities from total assets. It is also the term used by not-for-profit organizations instead of owner’s equity or stockholders’ equity. To learn more see our Explanation of...
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
See natural expense classification.
See old-age, survivor, and disability insurance (OASDI).
The cost of telephone service that was used during the period shown on the income statement.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
A form used at a bank to inform its customer that the customer’s account is being reduced for a fee or other charge.
See next-in, first-out cost flow assumption (NIFO).
Used in conjunction with cost or expense behavior. Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
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