Glossary

is an outstanding customer debt on a credit sale.

is a contra account, meaning it is attached to another account and is used to offset the main account balance that records the total depreciation expense for a fixed asset over its life.

is a contra asset account and is subtracted from Accounts Receivable to determine the Net Realizable Value of the Accounts Receivable account on the balance sheet.

is the more widely used method because it satisfies the matching principle.

are uncollectible amounts from customer accounts.

estimates bad debt expenses based on the balance in accounts receivable.

is the asset’s original cost less accumulated depreciation.

is the process by which a long-term asset is recorded on the balance sheet and its allocated costs are expensed on the income statement over the asset’s economic life.

has an opposite normal balance to its paired account, thereby reducing or increasing the balance in the paired account at the end of a period; the adjustment can be an addition or a subtraction from a controlling account.

provides the exclusive right to reproduce and sell artistic, literary, or musical compositions.

represents the amount a company paid for the manufactured items that it sold.

is the depreciation expense over the asset’s useful life.

is the process of allocating the cost of a tangible asset over its useful life, or the period of time that the business believes it will use the asset to help generate revenue.

is the work of the employees who are directly involved in the production of goods or services.

are the raw materials and component parts that are directly economically traceable to a unit of production.

delays recognition of bad debt until the specific customer accounts receivable is identified.

are manufactured products that have been completed but not yet sold to customers.

is an unavoidable operating expense that does not change in total over the short term, even if a business experiences variation in its level of activity.

refers to the value of certain favorable factors that a business possesses that allows it to generate a greater rate of return or profit.

is the amount of markup on the manufactured goods.

estimates bad debt expenses based on the assumption that at the end of the period, a certain percentage of sales during the period will not be collected.

is a company asset that includes beginning inventory plus purchases, which include all additions to inventory during the period.

(sometimes referred to as factory overhead) includes all of the costs that a manufacturing business incurs, other than the variable costs of direct materials and direct labor required to build products.

is used to keep track of amounts that are owed as short-term or long-term business loans.

is a contract that provides a company exclusive rights to produce and sell a unique product.

are simply all of the expenses that are not product costs, such as all selling and administrative expenses.

updates and records the inventory account at certain, scheduled times at the end of an operating cycle.

automatically updates and records the inventory account every time a sale, or purchase of inventory, occurs.

are all those costs associated with the acquisition or production of goods and products.

consist of items in inventory that have not yet been entered into production or used.

is the price the asset will sell for or be worth as a trade-in when its useful life expires.

is the price the asset will sell for or be worth as a trade-in when its useful life expires.

is the exclusive right to the name, term, or symbol it uses to identify itself or its products.

is the length of time the asset will be productively used within operations.

is one that varies in direct proportion to the level of activity within the business.

includes manufactured products that have been started but are not yet completed.