To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
A company’s receipts that appear on the company’s records but do not yet appear on the bank statement. For example, a retail store’s receipts of March 31 are deposited after banking hours on March 31 or...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
The date that determines which stockholders are entitled to receive a corporation’s declared dividend. No accounting entry is made on this date.
An accounting year that ends on a date other than December 31. For example, a school district might have a fiscal year of July 1, 2023 through June 30, 2024. A retailer might have a fiscal year consisting of the 52 or 53...
See direct labor efficiency variance and variable manufacturing overhead efficiency variance.
A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...
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.
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
Manufactured products that are often expressed in units, machine hours, etc.
A company might construct a building and then sell the building to an investor who in turn leases the building back to the company.
See warranty liability.
An asset account used to record amounts given to an employee with the expectation of repayment. For example, if an employee is given money by a company and the money is expected to be repaid or spent for company...
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.
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
The borrower who provides to a lender an asset as collateral for a loan.
Also known as freight-out or as delivery expense. This is an operating expense further classified as a selling expense. It results when merchandise is sold with terms of FOB destination.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
How can I determine the difference in earnings from using LIFO instead of FIFO? The difference in a corporation’s earnings from using LIFO instead of FIFO can be determined by the amounts reported in the balance sheet...
See membership dues.
Billing a client based on the value of the information or service provided rather than billing based on time spent.
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is...
The statements, standards, interpretations and other financial reporting guidelines issued by the Financial Accounting Standards Board. The FASB pronouncements are available at www.FASB.org.
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
The amount that a bank commits to lend a borrower during a specified purpose.
The current liability account which reports the amount of salaries earned by a company’s employees, but which have not yet been paid by the company.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
Future amounts that have been discounted to the present.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
In financial accounting this term often refers to the accounting guidelines or principles of conservatism and materiality.
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
A lender or supplier who is owed money but does not have a lien on any of the assets of the company that owes the money. If the company that owes the money is liquidated, the unsecured lender receives money only after...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
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