One of the financial statements issued by a nonprofit organization which reports expenses according to both function and nature. Learn more about Nonprofit Accounting.
One of the financial statements issued by a nonprofit organization which reports expenses according to both function and nature. Learn more about Nonprofit Accounting.
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
Also referred to as the current interest rate, the yield-to-maturity, and the effective interest rate. The market interest rate is always changing whereas the stated interest rate does not change.
A major classification on the balance sheet. It is the second long term asset section after current assets. Included are land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks,...
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
Waste, scrap, evaporation, etc. in the manufacturing of products. Normal spoilage is considered unavoidable and is part of the cost of producing the good output. Abnormal spoilage is considered avoidable and is not part...
See long-term assets.
This financial statistic is the net income of a corporation after income tax (less any preferred dividends) divided by the weighted average number of shares of common stock outstanding during the same period of time.
The benefit foregone by choosing another course of action. Also known as the opportunity cost. The lost opportunity is sometimes measured by the lost contribution margin (sales minus the related variable costs).
A term often used when referring to office workers, managers, professionals, and executives. These employees’ pay is often stated as a salary for a month (and not as an hourly pay rate).
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
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...
A record of the details to support a general ledger account. The general ledger account is often referred to as the control account. For example, the accounts receivable subsidiary ledger provides the details to support...
Past omitted dividends on cumulative preferred stock. Generally these omitted dividends were not declared and, therefore, do not appear on the corporation’s balance sheet as a liability. However, they must be...
Preferred stock where the dividend could be more than the original, stated dividend.
One of the steps in effective internal control. An example of separation of duties is to have the money handling be performed by someone who does not update the records. This means that the money counters at a church...
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
A balance sheet liability account which reports the total amount owed to employees at the balance sheet date for future vacation days as a result of the employees’ past work.
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
This current liability account reports the ”net” amount a company owes its employees as of the date of the balance sheet. The ”net” amount is the amount of the employees’...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
See old-age, survivor, and disability insurance (OASDI).
Income or revenue earned by a company that is outside of its main operating activities. For a retailer the interest earned on its temporary investments is a nonoperating revenue (or nonoperating income).
An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that...
A section of a publicly traded corporation’s annual report to the SEC (Form 10-K). This section contains extensive information from management about the corporation’s financial condition and its operations.
Verifiable, objective (not subjective), and you can depend on it.
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
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...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
The fixed manufacturing costs (e.g., property tax, rent, and depreciation on factory) that have been assigned to (absorbed by) the products manufactured via a predetermined rate. Ideally, by the end of the accounting...
A highly summarized income statement
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
Another company that supplies goods or performs services. Also known as a vendor.
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
Dollars of gross profit divided by the dollars of net sales. Also known as gross margin.
Featured Review
"As an aspiring online bookkeeper with prior office experience in the same field, I found myself seeking a stronger foundation in accounting. That's when I discovered AccountingCoach PRO, and it's been an absolute game-changer. The site reignited my passion for accounting, offering a well-structured platform that's become my go-to for reinforcing the basics. What I appreciate most is the clarity and depth of the materials; they've not only helped me brush up on concepts but have also enabled me to confidently recommend this resource to my community of aspiring and established online bookkeepers and accountants on Facebook. Thanks to AccountingCoach PRO, I've rekindled my enthusiasm for learning, and am building a more robust skill set to excel in my career journey." - John O.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: