truck at the vendor’s dock). Since the goods in transit are now owned by AVCO, the cost of $5,000 must be reported on AVCO’s December 31 balance sheet as the current asset inventory and the current liability...
truck at the vendor’s dock). Since the goods in transit are now owned by AVCO, the cost of $5,000 must be reported on AVCO’s December 31 balance sheet as the current asset inventory and the current liability...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
__________ net income. 6. Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________ assets. 7. Assets are usually reported on the...
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...
An average that changes with an additional purchase. See perpetual moving average in Explanation of Inventory and Cost of Goods Sold.
Part of a company’s administration that is responsible for preparing the financial statements, maintaining the general ledger, paying bills, billing customers, payroll, cost accounting, financial analysis, and...
Net sales revenues minus the cost of goods sold.
The actual cost incurred for manufacturing costs that does not change as production volume changes. Examples include the property tax, rent, and depreciation of the factory building and equipment, and the salaries of the...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
Delivery expense to be paid by the seller when its merchandise is sold with terms of FOB destination. This is an operating expense and is not included in the cost of merchandise.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
The cost of telephone service that was used during the period shown on the income statement.
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
An expectation that as a task is repeated there will be significant time reductions during the early repetitions. The time savings will dissipate after continuous performance. This is important to consider when setting...
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
A stockholders’ equity account with a credit balance. The credit balance results when a corporation sells some of its treasury stock for an amount that exceeds the corporation’s cost of the treasury stock...
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
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.
See Explanation of Inventory and Cost of Goods Sold.
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
The statement of the Financial Accounting Standards Board entitled Financial Statements of Not-for-Profit Organizations. This statement was originally issued in June 1993 and can be read at no cost at www.FASB.org.
The allocation to expense of the cost of an intangible asset such as a patent or goodwill.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
See next-in, first-out cost flow assumption (NIFO).
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.
Featured Review
"I have taken Accounting classes THREE DIFFERENT TIMES and failed every time - until now. Thanks to AccountingCoach, I finally understand the basic Accounting concepts that I couldn't figure out in a fast-paced classroom setting. I wish I would have found this site YEARS ago. Thank you, thank you, thank you!" - E.M.
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: