A table showing the present value factors to be applied to the constant amount occurring at the beginning of each equal time interval. Also known as the present value table for an annuity in advance.
A table showing the present value factors to be applied to the constant amount occurring at the beginning of each equal time interval. Also known as the present value table for an annuity in advance.
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...
A balance sheet with classifications (groupings or categories) such as current assets, property plant and equipment, current liabilities, long term liabilities, etc. To learn more, see Explanation of Balance Sheet.
The one-year period ending at an organization’s typical low point of activity. For example, a school’s natural business year is July 1 through June 30. It is practical to have the accounting and financial...
Also referred to as the P & L and the income statement. To learn more, see Explanation of Income Statement.
The point at which several products emerge from a common process.
A loss from holding an asset and the loss has not yet been reported in the financial statements.
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
Same as the Days Sales in Accounts Receivable
The amount by which total costs will change when an activity is increased by one unit. In the equation of the line, y = a + bx, the variable cost rate is represented by ‘b’ and the units of activity are...
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
The repurchase of bonds by the issuer of the bonds.
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
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...
See bond issue costs.
An employee fringe benefit provided by an employer that allows employees to be absent from work with pay. Often the number of paid vacation days allowed is based on the number of years of employment.
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
What is the monthly close? Definition of Monthly Close In accounting, monthly close is a series of steps and procedures that are followed so that a company’s monthly financial statements are in compliance with the...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
Factors that are used to convert future cash flows to their present value.
A variance arising in a standard costing system that indicates the difference between the actual amount of fixed manufacturing overhead incurred and the budgeted amount of fixed manufacturing overhead. To learn more, see...
Also referred to as the current interest rate, the yield-to-maturity, and the effective interest rate. The market interest rate is always changing whereas the stated interest rate does not change.
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
The cost of repairing or replacing previously sold products during their warranty periods.
A corporation with a limited number of stockholders and whose stock is usually not publicly traded.
Federal government securities sold at a discount (because of no interest payments) with maturity dates of less than one year.
This is an operating expense resulting from making sales on credit and not collecting the customers’ entire accounts receivable balances.
The cash amounts received after deducting the related income taxes and also the cash amounts paid after deducting the cash saved when the amounts are income tax deductible.
The net amount of revenues and gains minus expenses and losses for the current year for the sole proprietorship owned by R. Smith. After the financial statements are prepared for the year, this amount will be transferred...
The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of the bond’s face amount.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
Using the information generated in activity-based costing to plan and control activities and processes.
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.
See direct materials usage variance.
A major classification on the balance sheet. It is the second long term asset section after current assets. Included are land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks,...
An income statement with at least two columns of amounts. The column of amounts that is closest to the words will contain the amounts for the most recent period of time. The columns furthest from the words will be the...
Noncurrent assets. Assets that are not intended to be turned into cash or be consumed within one year of the balance sheet date. Long-term assets include long-term investments, property, plant, equipment, intangible...
See vacation pay payable.
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