Income based upon some assumptions.
Income based upon some assumptions.
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
A check that has been issued but has not yet been paid by the bank on which it is drawn. An uncleared check is also known as an outstanding check.
A department that is directly involved in manufacturing products. Examples are the machining, finishing, and assembling departments.
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
Accounts receivable that serve as the collateral for a loan.
The amounts withheld for employees’ checks for Social Security tax, Medicare tax, federal income tax, state income tax, and voluntary deductions such as United Way, union dues, 401(k) contributions,...
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
Using the information generated in activity-based costing to plan and control activities and processes.
An asset account used to record a loan to another party that has real estate as collateral.
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
In accounting this is the rate used to discount future cash flows in order to determine their present value.
What is a liability account? Definition of Liability Account A liability account is a general ledger account in which a company records the following which resulted from business transactions: Amounts owed to suppliers...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
Federal government securities sold at a discount (because of no interest payments) with maturity dates of less than one year.
See perpetual system of inventory.
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
See Allowance for Doubtful Accounts.
See Internal Revenue Service (IRS).
Free on Board. See FOB destination and FOB shipping point.
Receivables due from customers. See accounts receivable.
The net amount of revenues and gains minus expenses and losses for the sole proprietorship owned by Matt Jones. After the financial statements are prepared for the year, this amount will be transferred to Matt Jones,...
A loss from holding an asset and the loss has not yet been reported in the financial statements.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
In regression analysis this is a statistic (designated as r-squared) indicating the percentage of the change occurring in the dependent variable that is explained by the change in the independent variable(s). The percent...
An entry without debit or credit amounts. For example, assume that a corporation has 100,000 shares of $0.50 par value common stock before a 2-for-1 stock split. At the time of the split a memo entry would be entered in...
See quick ratio.
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
See budgetary slack.
Commitments are items that are not reported as liabilities as of the balance sheet date. Some of these items are reported in the notes to the financial statements. Examples include noncancelable contracts to rent space...
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...
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