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...
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...
The repurchase of bonds by the issuer of the bonds.
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
See weighted-average cost flow assumption and moving-average cost of inventory.
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
See cost of goods sold.
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
The sale, retirement, or exchange of property, plant and equipment.
A stated legal amount for each share of preferred stock. The par value for every share of preferred stock issued must be recorded in the separate stockholders’ equity account Preferred Stock.
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...
See sum of the years’ digits method of depreciation.
The exchange or trade-in of a long-term asset for a completely different long-term asset. For example, exchanging an antique car for land.
A table showing present value factors for various interest rates and numbers of years/periods for a single amount at a future point in time.
The supplier of goods or services.
The discounted value of a series of equal amounts occurring at the beginning of each equal time interval.
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
A method for estimating the inventory of a retailer. This method requires that the retail amounts and the related cost amounts are available for beginning inventory and purchases. An illustration of this technique is...
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
The discounted value of a series of equal amounts occurring at future points with equal time intervals.
The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
A non-operating item that results from the sale of a long-term asset at an amount greater than the carrying amount (book value) of the truck at the time it is sold.
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
This organization has changed its name to Institute of Management Accountants. It is currently using the name IMA to reflect the many backgrounds of its membership.
The discounted value of a series of equal amounts occurring at the end of each equal time interval. To learn more, see our Present Value of an Ordinary Annuity Outline.
What is separation of duties? What is Separation of Duties The separation of duties is one of various internal control techniques for safeguarding a company’s assets. By separating employee’s duties, the likelihood...
The amount of owner’s equity or stockholders’ equity reported on a company’s balance sheet. This is not an indication of the company’s fair market value.
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
The amount that a recurring equal amount deposited at the beginning of each period will grow to under compounded interest. An annuity due is also known as an annuity in advance.
The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
The issued shares of common stock minus the shares of treasury stock. The weighted average of the outstanding shares is used to compute the earnings per share.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
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