The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
An asset’s cost that has been assigned to Depreciation Expense.
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
Spoilage or waste that is likely to occur and cannot be avoided at a reasonable cost.
See Explanation of Inventory and Cost of Goods Sold.
A reduction in the cost of goods purchased that is allowed by the supplier based on the authorized return of goods. Also a general ledger account in which the purchase returns are recorded under the periodic inventory...
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
Net sales revenues minus the cost of goods sold.
The statement of the Financial Accounting Standards Board entitled Financial Statements of Not-for-Profit Organizations. This statement was originally issued in June 1993 and can be read at no cost at www.FASB.org.
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
The cost of telephone service that was used during the period shown on the income statement.
An average that changes with an additional purchase. See perpetual moving average in Explanation of Inventory and Cost of Goods Sold.
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
See Explanation of Inventory and Cost of Goods Sold.
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...
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
The cost to operate office equipment during a specified time interval.
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
A decrease in the value of a long term asset to an amount that is less than the amount shown under the cost principle.
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
The allocation to expense of the cost of an intangible asset such as a patent or goodwill.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
See next-in, first-out cost flow assumption (NIFO).
An expectation that as a task is repeated there will be significant time reductions during the early repetitions. The time savings will dissipate after continuous performance. This is important to consider when setting...
Financial Ratios(Quick Test #5 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
What is the death spiral? Definition of Death Spiral In cost accounting and managerial accounting, the term death spiral refers to the repeated elimination of a manufacturer’s products which will result in spreading...
What is the tax advantage when bonds are issued instead of stock? Definition of Bonds and Stock In this context, bonds refers to bonds payable, a form of long-term debt that typically promises to pay interest every six...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
What causes a reduction in Accumulated Depreciation? Definition of Accumulated Depreciation Accumulated Depreciation is a general ledger contra asset account associated with a company’s property, plant and equipment....
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
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