In accounting this is the rate used to discount future cash flows in order to determine their present value.
In accounting this is the rate used to discount future cash flows in order to determine their present value.
See job order cost sheet.
A request by the petty cash custodian for a company check in order to return the amount of currency and coins in the petty cash box to the amount shown in the general ledger account.
A document that indicates the quantity of goods received. This report is often matched in the accounts payable department with the purchase order and the vendor’s invoice prior to paying the vendor.
A check drawn on a bank. A cashier’s check leaves no doubt that the funds represented by the check are real. A bank money order or a certified check would also assure the payee that the funds are in the bank.
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
Segments of a business. For example, a corporation may have a consumer division and an industrial division in order to improve its effectiveness in marketing its goods.
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
Sending merchandise to another party (an agent, consignee) in order to sell the merchandise. Also see consigned goods.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
An original record containing the details to substantiate a transaction entered in an accounting system. For example, the source document for a purchase of merchandise is the supplier’s invoice supported by the...
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
by the inventory turnover ratio DSI = 360 divided by 4.2 (see question #10) Days' sales in inventory = 85.7 days 12. When a company offers an early payment discount of 1/10, net 30, the cash discount is...
, the asset account Cash needs to be credited for $1,000 in order to reduce this asset’s normal debit balance. Therefore, one or more accounts will need to be debited. Since $100 of the payment was for interest, the...
Usually the pay for the hours worked in excess of 40 hours per week. Federal laws require payment for these hours for employees who are not able to control their hours. For example, a company is required to pay a...
What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
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...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
. The payment for the equipment is to be made on February 10. Under the accrual method, on December 29 the company should debit the asset account Equipment and credit the liability account Accounts Payable. (When the...
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
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...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
Preferred stock where past, omitted dividends do not have to be paid before a dividend can be paid to common stockholders. In the case of noncumulative preferred stock, only its current year dividend needs to be paid in...
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
and perhaps fraudulent invoice. Example of Three-Way Match The “three-way” part of the three-way match refers to the three documents that will be compared: The vendor’s invoice that was received and will become...
, but will not have recorded the current liability, accounts payable. The accounts payable person/department will have the retailer’s purchase order and receiving ticket/record, but is awaiting the vendor’s...
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
. Examples of Accounts Payable Often a company will send a purchase order to a supplier requesting goods. When the supplier delivers the goods it also issues a sales invoice stating the amount and the credit terms such...
What is a valuation account? Definition of Valuation Account In accounting, a valuation account is usually a balance sheet account that is used in combination with another balance sheet account in order to report the...
Why are loan costs amortized? Definition of Loan Costs Loan costs may include legal and accounting fees, registration fees, appraisal fees, processing fees, etc. that were necessary costs in order to obtain a loan. If...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
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