The underlying true cause of a cost occurring. In other words, the root cause is more than a mere correlation between an event and a cost. There is a real cause and effect relationship.
The underlying true cause of a cost occurring. In other words, the root cause is more than a mere correlation between an event and a cost. There is a real cause and effect relationship.
The allocation to expense of the cost of an intangible asset such as a patent or goodwill.
See budgetary slack.
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
This is the classification shown on a single-step income statement which reports the operating revenues, nonoperating revenues, and gains in one section of the income statement. Revenues and gains enhance the...
A classification on a single-step income statement for both operating and nonoperating expenses and losses that pertain to the time interval shown in the heading of the income statement.
Current assets minus current liabilities.
See cleared.
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
The supplier of goods or services.
See not sufficient funds check.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
A loss that occurs by holding an asset. Holding losses might be recorded on the income statement or they might not be recorded depending on the asset and the amounts.
One of the steps in effective internal control. An example of separation of duties is to have the money handling be performed by someone who does not update the records. This means that the money counters at a church...
An amount owed on bill or invoice from a vendor or supplier of goods or services.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
Financial Executives Institute.
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
Why are the amounts on the financial statements rounded to thousands or millions? Definition of Rounding Amounts on Financial Statements Rounding the amounts on a company’s financial statements means dropping the less...
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
The person or business that receives a loan from a bank or other lender.
The Certified Management Accountant (CMA) Exam is a 13-hour, four-part exam on business analysis, management accounting and reporting, strategic management, and business application. The exam is administered through IMA,...
A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000,...
See income statement. To learn more, see Explanation of Income Statement.
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
See warranty liability.
Individuals elected by the common stockholders of a corporation to represent the stockholders and to establish the policies of the corporation. The board of directors appoints the officers of the corporation and declares...
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
A term to mean the company’s general ledger or accounting records.
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