A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
See just-in-time (JIT).
Regular fees or charges often paid to an organization at regular intervals. For example, a state CPA organization might have annual dues of $200.
See variable manufacturing overhead spending variance.
Financial statements based upon various assumptions.
A department within a factory that does not directly produce a product. Examples are the factory maintenance department, factory administrative department, and quality assurance department.
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
The products in a manufacturer’s inventory that are completed and are awaiting to be sold. You might view this account as containing the cost of the products in the finished goods warehouse. A manufacturer must...
A second retained earnings account that reports the amount that a company has transferred from the unappropriated or regular retained earnings account.
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
See fixed manufacturing overhead volume variance.
Also referred to as a sunk cost. A past cost is not relevant to a decision.
See units of production method of depreciation.
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
Point of purchase.
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
One of the types of donor-imposed temporary restrictions. An example of a purpose restriction is a cash donation with a donor-imposed requirement that the money be used only to purchase a vehicle for one of its programs....
Manufacturing overhead assigned to units of output. Often this is applied via a standard overhead rate. See the Explanation of Standard Costing.
See International Financial Reporting Standards (IFRS).
An effort to have materials delivered by suppliers just as the materials are needed, thereby eliminating the need for the buyer to store inventories of component parts. Obviously, the buyer is relying on the...
Spoilage or waste that is likely to occur and cannot be avoided at a reasonable cost.
This is granted by banks only to very creditworthy customers. It states that the bank will guarantee amounts that its customer incurred when purchasing goods. A letter of credit might be necessary for a U.S. company...
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
A financial ratio that compares a company’s interest expense to the company’s income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the...
How should an interest only loan be recorded? Defintion of an Interest Only Loan An interest only loan specifies that only interest payments are required during the life of the loan. No principal payment is required...
The additional amount given to employees for the overtime hours. Usually this is the “half-time” in time and one-half. For example, if an employee’s hourly pay rate is $10 per hour and the employee...
Multiplying the individual items contained in each bill of material times the number of units expected to be produced during a specified time period. The result is the total quantity of each input that will be needed for...
One hundredth (1/100) of a percentage point. In other words, one percentage point is equal to 100 basis points. The difference between an interest rate of 6.5% and 6.75% is 25 basis points.
A book of original entry that requires that both the account being debited and the account being credited be listed along with the respective amounts. Because of accounting software and special journals there are...
The date on which the board of directors of a corporation declares a dividend on the corporation’s stock. On this date an accounting entry is made to debit Retained Earnings and to credit Dividends Payable.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
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