Obligations of the enterprise that are not payable within one year of the balance sheet date. Two examples are bonds payable and long term notes payable.
Obligations of the enterprise that are not payable within one year of the balance sheet date. Two examples are bonds payable and long term notes payable.
Also referred to as the useful life. This differs from the physical life of an asset. For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
This term is associated with preferred stock that does not allow its holders to receive more than its stated dividend. The nonparticipating feature is typical in preferred stock. To learn more about preferred stock, see...
A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
The United States Internal Revenue Code which contains the federal laws and regulations pertaining to federal taxes.
The amount by which the proceeds from the sale of land exceeded the carrying amount of the land sold. It is reported as a non-operating or “other” item on a multiple-step income statement.
Cash that can be used only for the purpose intended.
The amount of wages and related expenses that have been incurred by the employer (and earned by the employees) but have not yet been paid.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
Magnetic ink character recognition.
Some examples of intangible assets include copyrights, patents, goodwill, trade names, trademarks, mail lists, etc. These assets will be reported at cost (or lower) on the balance sheet after property, plant and...
Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for...
A person or business that has a checking account or savings account at a bank.
See contingent gain.
Scrap or waste that should have been avoided. In other words, abnormal spoilage is the amount that is over and above the normal amount that is expected in a production process.
A highly summarized balance sheet
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
See inventory: work-in-process (WIP).
What is a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
A term often used when referring to office workers, managers, professionals, and executives. These employees’ pay is often stated as a salary for a month (and not as an hourly pay rate).
A loan in which the interest rate does not change over the life of the loan.
See accounting equation.
Total liabilities divided by total assets. This indicates how much of a corporation’s assets are financed by lenders/creditors as opposed to purchased with owners’ or stockholders’ funds. If a high...
See stockholders’ equity.
The time required to set up a piece of production equipment.
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
A revenue account in a bank’s general ledger that indicates the amounts earned by the bank by servicing its customers’ accounts at the bank.
Free Alongside Ship. Terms indicating that the seller’s price includes delivery of goods at a ship’s pier. Title to the goods will transfer to the buyer alongside the ship.
See first in, first out (FIFO).
Sending work to another organization instead of processing the work in-house. Often payroll is outsourced to a company that specializes in payroll processing.
The cost of the next unit.
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
The party receiving goods to be sold. See consigned goods.
See income statement. To learn more, see Explanation of Income Statement.
One of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities,...
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