Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
An expectation that as a task is repeated there will be significant time reductions during the early repetitions. The time savings will dissipate after continuous performance. This is important to consider when setting...
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
Delivery expense to be paid by the seller when its merchandise is sold with terms of FOB destination. This is an operating expense and is not included in the cost of merchandise.
Net sales revenues minus the cost of goods sold.
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
A reduction in the cost of goods purchased that is allowed by the supplier based on the authorized return of goods. Also a general ledger account in which the purchase returns are recorded under the periodic inventory...
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 method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
Under the accrual basis of accounting, this account reports the cost of the temporary help services that a company used during the period indicated on its income statement.
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
See next-in, first-out cost flow assumption (NIFO).
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
See Explanation of Inventory and Cost of Goods Sold.
A decrease in the value of a long term asset to an amount that is less than the amount shown under the cost principle.
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
The optimum purchase (or production) quantity which minimizes the combined total cost of carrying inventory and processing additional purchase orders (or production setups).
See Explanation of Inventory and Cost of Goods Sold.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
A stockholders’ equity account with a credit balance. The credit balance results when a corporation sells some of its treasury stock for an amount that exceeds the corporation’s cost of the treasury stock...
The actual cost incurred for manufacturing costs that does not change as production volume changes. Examples include the property tax, rent, and depreciation of the factory building and equipment, and the salaries of the...
Part of a company’s administration that is responsible for preparing the financial statements, maintaining the general ledger, paying bills, billing customers, payroll, cost accounting, financial analysis, and...
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
The cost to operate office equipment during a specified time interval.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
A corporation’s own stock that has been repurchased from stockholders. Also a stockholders’ equity account that usually reports the cost of the stock that has been repurchased.
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
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).
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