See goods in transit.
See goods in transit.
A current liability account that reports the amounts owed to employees for hours worked but not yet paid as of the date of the balance sheet.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
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...
A long term asset account containing the cost of delivery equipment acquired by a company and used in its business. The account will appear on the balance sheet under the heading of Property, Plant and Equipment. There...
The person paying rent for using but not owning the asset.
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
A balance on the right side (credit side) of an account in the general ledger.
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
See bill of materials.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
In the EOQ model, order costs are the incremental costs of processing an order of goods from a supplier. Examples of order costs include the costs of preparing a requisition, a purchase order, and a receiving ticket,...
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
An actual count of the goods owned by the business.
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
What is the difference between wages and salary? You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction… Definition of Wages Wages are...
See certified public accountant.
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
A corporation’s own stock that has been repurchased from stockholders. Also a stockholders’ equity account that usually reports the cost of the stock that has been repurchased.
See Explanation of Inventory and Cost of Goods Sold.
A sole proprietorship, partnership, or corporation organized for the purpose of earning profits and enhancing the financial position of the owners.
Verifiable, objective (not subjective), and you can depend on it.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
for deposit to account #xxxx followed by the payee’s signature. Many companies endorse checks by using a rubber stamp containing this restriction. Another example of a restrictive endorsement is Pay to the order of...
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
See activity-based costing.
Inventory that is less than the expected amount. It might be associated with theft or damage.
The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.
A loan having the security of a lien on the borrower’s real estate.
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
See net realizable value.
How do cash dividends affect the financial statements? Definition of Cash Dividends Cash dividends are a distribution of a corporation’s earnings to its stockholders or shareholders. For cash dividends to occur, the...
See economic order quantity (EOQ) model.
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
The amount that a bank commits to lend a borrower during a specified purpose.
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
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