The time from when goods are ordered until the time when the goods are received.
The time from when goods are ordered until the time when the goods are received.
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
An asset which serves as collateral for a loan.
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
A simple form of business where there is one owner. Legally the owner and the sole proprietorship are the same. However, for accounting purposes the economic entity assumption results in the sole proprietorship’s...
The stockholders’ equity account which reports the par value of the preferred shares of stock that have been issued. Amounts received that are greater than the par value are recorded in Paid-in Capital in Excess of...
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
Sales before deducting sales returns, sales allowances, and sales discounts.
Under the accrual method of accounting, this account reports the amount of wages that the delivery employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
The cost of the next unit.
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
Cash received. Receipts are different from revenues.
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
Recording an entry in an account in the general ledger or in a subsidiary ledger.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
The acronym for original equipment manufacturer.
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
See cash surrender value.
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
The amount by which the proceeds from the sale of an automobile used in the business exceeded its carrying amount at the time it is sold.
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
Sales made on account. Sales where the customer is allowed to pay at a later date. Noncash sales.
Are fixed assets the same as plant assets? Definition of Fixed Assets and Plant Assets My experience indicates that people use the term fixed assets to mean the same as plant assets. As a result, I define both fixed...
The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
See net realizable value.
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
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.
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...
A corporation’s net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
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.
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.
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