To receive money in exchange for a promise to repay the amount to the lender.
To receive money in exchange for a promise to repay the amount to the lender.
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
The owner’s equity accounts are the owner’s capital account and the owner’s drawing account. During the year the income statement accounts (revenues, expenses, gains, losses), the owner’s drawing...
A cost and/or volume of activity that is outside of an expected range.
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
See direct labor rate variance.
Journals other than the general journal. Special or specialized journals include the cash receipts journal, the cash disbursements journal, the purchases journal, and the sales journal.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
A top ranking corporation official usually reporting to the chief executive officer and responsible for the operations of the corporation.
The amount that a bank commits to lend a borrower during a specified purpose.
The general ledger account Cash that reports currency, coins, undeposited checks, and the checking accounts of a company. (Could also be a reference to a customer required to pay cash for purchases.)
An employee fringe benefit provided by an employer that allows employees to be absent from work with pay. Often the number of paid vacation days allowed is based on the number of years of employment.
Sales made on account. Sales where the customer is allowed to pay at a later date. Noncash sales.
No insurance. If a company chooses to self insure for fire damage, it does not have insurance for fire damage. Companies with a chain of stores in various cities may decide not to have insurance, since their risk is...
The general guidelines and principles, standards and detailed rules, plus industry practices that exist for financial reporting. Often referred to by its acronymn GAAP. To learn more, see Explanation of Accounting...
The current liability account which reports the amount of salaries earned by a company’s employees, but which have not yet been paid by the company.
Waste, scrap, evaporation, etc. in the manufacturing of products. Normal spoilage is considered unavoidable and is part of the cost of producing the good output. Abnormal spoilage is considered avoidable and is not part...
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
See residual income (RI).
This current liability account reports the amount a company owes the U.S. government as of the balance sheet date for the federal income taxes withheld from its employees’ salaries and wages.
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
See long-term assets.
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
The symbol that represents the total cost in the equation of the cost line y = a + bx.
See notes to financial statements.
A corporation’s net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires 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...
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
Amounts spent for property, plant and equipment.
A formal written promise to pay interest every six months and the principal amount at maturity.
Receivables other than Accounts Receivable. Examples include amounts due from employees and income tax refunds receivable.
Net income divided by net sales.
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
See bill of materials.
Featured Review
"I have a BA in accounting and economics, and have passed all four parts of the CPA exam (back when there were still essays required on the exam). However, I have been on a career break for a while due to caretaking responsibilities for aging and ailing parents, as well as becoming a mom and raising our son. I was studying for a civil service exam and felt I needed some refresher pointers in accounting and bookkeeping. I did a search online, and discovered your AccountingCoach website. I was immediately impressed with how thorough and elegantly organized your site is. I was able to search for any topic in accounting (inventory methods, retained earnings, financial statements, financial ratios, etc.) with ease. I quickly upgraded to PRO, and felt as though I was systematically re-educating myself with the latest in the accounting field. This has been a great benefit to me as I can review and challenge myself with your materials, with the flexibility to suit my schedule, and in hopes of confidently relaunching my career." - Caryn P.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: