This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
What is a stock split? Definition of Stock Split A stock split usually refers to a corporation dividing its existing number of shares of common stock into a greater number of shares. For instance, a corporation with...
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
Financial Statements Video Training Part 9 Income statement: revenues, cost of goods sold, expenses, nonoperating items Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
A variance arising in a standard costing system that indicates the difference between the standard cost of direct materials that should have been used (standard quantity times standard cost) for the good output and the...
See variable manufacturing overhead spending variance.
The products in a manufacturer’s inventory that are completed and are awaiting to be sold. You might view this account as containing the cost of the products in the finished goods warehouse. A manufacturer must...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
The issued shares of common stock minus the shares of treasury stock. The weighted average of the outstanding shares is used to compute the earnings per share.
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...
The cost of repairing or replacing previously sold products during their warranty periods.
The amount that a recurring equal amount deposited at the beginning of each period will grow to under compounded interest. An annuity due is also known as an annuity in advance.
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
See sum of the years’ digits method of depreciation.
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
An action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s 401(k) plan associated with the employees in the delivery department during the period indicated in the...
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
A stated legal amount for each share of common stock. The par value for every share of common stock issued must be recorded in the separate stockholders’ equity account Common Stock.
The practice where an asset purchased within a year is assumed to have been purchased at the mid-point of the year. For example, an asset purchased during the calendar year 2024 is assumed to have been purchased on July...
A term used in cost accounting to arrive at the cost per unit. The term is associated with the units that are not completed at the end of an accounting period. For example, if 500 units are completed as far as materials,...
See liquidation of LIFO layer.
See indirect manufacturing costs.
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
The estimated scrap value at the end of the useful life of an asset used in the business. It is also referred to as residual value.
What is the purpose of the cash flow statement? Definition of Cash Flow Statement The cash flow statement or statement of cash flows or SCF identifies a company’s major cash inflows and outflows that occurred the same...
See petty cash replenishment.
The amount of cash that could be received if a whole life insurance policy were canceled.
What is the profit and loss statement? Definition of Profit and Loss Statement The profit and loss statement, or P&L, is a name sometimes used to describe a company’s income statement, statement of income, statement of...
Allowing a person or company to purchase goods or services without paying cash at the time of purchase.
This current liability account reports the amount a company owes (must remit) for its employees’ Social Security and Medicare taxes as of the date of the balance sheet.
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
One component of the payroll tax referred to as FICA. (The other component of the FICA tax is the Medicare tax.) The Social Security tax is levied by the U.S. government on both the employee and the employer. In 2024 the...
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