A mathematical tool to optimize profits (contribution margin) given a limited amount of inputs and other constraints.
A mathematical tool to optimize profits (contribution margin) given a limited amount of inputs and other constraints.
A structured market for trading stocks and bonds such as the New York Stock Exchange or NASDAQ. Capital market can also include less structured markets such as private placements.
National Association of Accountants. This organization’s name was changed to Institute of Management Accountants and currently is referred to as IMA.
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...
Raw materials that are a traceable component of a manufactured product. For example, the direct material of a baseball bat is the wood. Flour, sugar, and vegetable oil are direct materials of a company that manufactures...
Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
This activity, which involves playing the float, is sometimes used when a company is facing an overdrawn checking account. Assume that a company has a checking account at NY Bank that is about to overdraw. To prevent the...
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
See U.S. Treasury bills.
An official pronouncement by the Financial Accounting Standards Board that involves a previously issued FASB Standard. FASB Interpretations are part of the generally accepted accounting principles.
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
See direct labor efficiency variance and variable manufacturing overhead efficiency variance.
Manufactured products that are often expressed in units, machine hours, etc.
Errors made by the bank on a company’s bank account. These are usually infrequent but could include an incorrect amount of a check or deposit or a check or deposit recorded in the wrong account.
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity in advance. An example would be the monthly rent on an apartment.
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
See phantom profits.
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.
The formal planning for significant expenditures, such as property, plant and equipment.
Regression analysis with only one independent variable.
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
See external financial reporting.
See contingent loss.
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...
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.
See donor-imposed restriction.
The statistic known as the coefficient of correlation. The range of this statistic is -1 to +1. When this statistic is squared the result is the percentage change in the dependent variable y that is explained by the...
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
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...
See consistency.
A term used to describe checks written by a company that have been received and paid by the bank on which they were drawn or written. The check number and amount will appear on the company’s checking account...
The person that owes money. If a bank lent you money, the bank is the creditor and you are the debtor.
To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
Usually means every two weeks. For example, if an employee is paid every other Thursday, the employee is paid biweekly. The person paid biweekly will receive 26 paychecks per year. (People paid two times per month...
Someone who performs a task for a company, but is not an employee. The IRS has criteria to assist in distinguishing between an independent contractor and an employee.
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