Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
Taking out a loan or issuing bonds in order to acquire an asset or another business.
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
An accounting year that ends on a date other than December 31. For example, a school district might have a fiscal year of July 1, 2023 through June 30, 2024. A retailer might have a fiscal year consisting of the 52 or 53...
The increase in a carrying amount. Also see write-up work.
See U.S. Treasury bills.
See inventory: finished goods (FG).
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
A class of corporation stock that provides for preferential treatment over the holders of common stock in the case of liquidation and dividends. For example, the preferred stockholders will be paid dividends before the...
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
See American Institute of Certified Public Accountants.
Cash that can be used only for the purpose intended.
Point of purchase.
An individual owner of a business that is not incorporated.
Fair, unbiased, and objective; not subjective.
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
A corporation’s reported net income and earnings per share for a three-month period.
See cash surrender value.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
See bond sinking fund.
The supplier of goods or services.
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...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
See fixed manufacturing overhead volume variance.
See sole proprietorship.
Assigning manufacturing overhead costs to products being manufactured by using a manufacturing overhead rate.
The combination of a manufacturer’s direct labor and factory overhead.
Goods placed with another party without transferring ownership. See consigned goods.
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
Where do preferred stocks go on the P&L? The amount received from issuing preferred stock is reported on the balance sheet within the stockholders’ equity section. Only the annual preferred dividend is reported on the...
Also referred to as a sunk cost. A past cost is not relevant to a decision.
The Roman numerals that indicate 1,000,000.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
The statements, standards, interpretations and other financial reporting guidelines issued by the Financial Accounting Standards Board. The FASB pronouncements are available at www.FASB.org.
A negative balance in the bank’s records for the company’s checking account.
One component of financial statement analysis. This method involves financial statements reporting amounts for several years. The earliest year presented is designated as the base year and the subsequent years are...
Verifiable, objective (not subjective), and you can depend on it.
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