See inventory: work-in-process (WIP).
See inventory: work-in-process (WIP).
The amount of cash that could be received if a whole life insurance policy were canceled.
See the Explanation of Break-even Point.
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...
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
The combination of a manufacturer’s direct labor and factory overhead.
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
In standard costing, the quantity variance could be the direct materials’ usage variance or the direct labor’s efficiency variance. The quantity variance is the difference between the quantity of inputs that...
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...
The repurchase of bonds by the issuer of the bonds.
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
An amount that is expensed immediately. For example, routine repair costs on equipment are revenue expenditures because they are charged directly to an income statement account such as Repairs and Maintenance Expense.
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
Assigning more manufacturing overhead to production than the amount that was actually incurred.
Preferred stock that is callable by the issuer at a certain price. The price and other conditions are disclosed in the preferred stock’s indenture.
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
If we dispose of an asset, will there be a change in the owner's equity? The owner’s equity of a sole proprietorship will change only if the disposal of an asset causes a gain or loss to be reported on the income...
What is the meaning of debtor? Definition of Debtor A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed. Example of Debtor If...
How does inflation affect the cost of goods sold? Inflation and the Cost of Goods Sold Generally speaking, a company selling goods during periods of inflation will see an increase in its cost of goods sold. When and by...
How do you record a payment for insurance? Definition of Payment for Insurance A company’s property insurance, liability insurance, business interruption insurance, etc. often covers a one-year period with the cost...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
A table showing the present value factors to be applied to the recurring equal amount occurring at the end of each equal time interval.
This is a national organization of certified public accountants. For more information go to www.aicpa.org.
How do you record the interest that is unpaid on a note payable? Definition of Interest Unpaid on Note Payable Interest that has occurred, but has not been paid as of a balance sheet date, is referred to as accrued...
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