Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
A major repair such as an engine overhaul, which will extend the useful life of the asset. The amount should be recorded in the asset account and then depreciated over the remaining life of the asset.
A liability account on the books of a company receiving cash in advance of delivering goods or services to the customer. The entry on the books of the company at the time the money is received in advance is a debit to...
See phantom profits.
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
An amount that should be charged to the current accounting period as an expense.
A quality of accounting information that facilitates the comparison of financial reporting of one company to the financial reporting of another company.
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
See inventory: work-in-process (WIP).
See Statement of Financial Accounting Standards.
See internal rate of return.
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
See cost-volume-profit (CVP).
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
Regression analysis with only one independent variable.
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.
A shortened version of the term bank reconciliation or bank statement reconciliation.
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
A form used at a bank to inform its customer that the customer’s account is being reduced for a fee or other charge.
See natural expense classification.
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
A distribution of part of a corporation’s past profits to its stockholders. A dividend is not an expense on the corporation’s income statement.
See donor-imposed restriction.
The percentage resulting from dividing the dividends per share by the market price per share.
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
See Explanation of Inventory and Cost of Goods Sold.
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
In accounting this refers to the multiplication of quantity times price, or number of units times price or cost per unit.
What does current portion of long term debt mean? Definition of Current Portion of Long-Term Debt The current portion of long-term debt is the amount of principal that will be due within one year of the date of the...
A series of equal amounts occurring at the end of each equal time interval. Also known as an annuity in arrears. An example is the monthly payments on a loan. Another example is the semiannual interest on a bond.
More formally known as the Uniform CPA Examination. This rigorous, 14-hour, computer-based exam consists of questions developed by the American Institute of Certified Public Accountants. The exam is in English only and...
A mathematical tool to optimize profits (contribution margin) given a limited amount of inputs and other constraints.
See budgetary slack.
The party owning an asset and receiving rent from another party (the lessee).
Amounts spent for property, plant and equipment.
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