Accounts Receivable - They are amounts that customers owe on their account as a result from the sale of goods and services.
Accounts Payable - Represents an organizations obligation to pay off a short-term debt. It is found on the balance sheet.
Raw Materials Inventory - Total cost of all materials in stock that have not yet been used towards the finished product.
Work In Process Inventory - Is the inventory of materials that have entered the production process. It refers to all materials and partly finished products at all stages of production.
Finished Goods Inventory - Manufactured goods that are ready for sale.
Fixed Asset - Resources that have physical characteristics and are used in the operation of a business. They are not for sale to customers. Also known as plant assets.
Cost of Goods Sold - The total costs of merchandise sold during a period.
Gross Margin - Represents the percent of total sales that organization retains after the direct costs associated with production. Its sales revenue minus costs of goods sold and then divided by total sales revenues, shown as a percentage.
Markup - Amount added to the cost price of goods. It is used to cover overhead and profit.
Inventoriable Costs - Costs that are an integral and necessary part of producing the finished product. They are also called product costs. With the matching principle they do not become expenses until the organization sells the finished goods inventory.
Fixed Costs - Costs that remain regardless of changes. i.e. insurances, property taxes, rent, etc...
Variable Costs - Costs that vary proportionately and directly with changes in activity.
Supplies Expense - The purchase of supplies such as paper and envelopes. Record at the end of an accounting period.
Supplies Inventory - Inventory of supplies purchased for use.
Wage Expense - Payments made to non-manufacturing employees regardless of whether they are salaried or hourly.
Wages Payable - Liability account that records the amount owed to employees for the hours they have worked and not yet paid.
Overheads - Refers to all ongoing business expenses not including labor, third party expenses billed directly to customers, and direct materials.
Liquid - Easily converted to money
Liquidity - Ability of an organization to pay their debt that are expected to be due within the next operating cycle or year.
Liquidation - When an organization has ended or filed for bankruptcy, its assets are sold and proceeds are used to pay the creditors. Any transaction that closes out a short or long position.
Insolvency - When the organizations liabilities exceeds their assets.
Solvency - The ability of the organization to meet its long term liabilities. The ability to pay its bills.
Impairment of Asset Value - An entity’s assets are not carried at more than their recoverable amount. A decrease in value from a previous period.
Financial Leverage - Utilizing borrowed money to increase production volume, sales, and earnings. It is measured as the ratio of total debt to total assets.
Operating Leverage - Extent to which an organization commits itself to high levels of fixed operating costs as compared to the levels of variable costs.
Direct versus Indirect expense - Direct expense is a cost that can be traced directly to a specific cost center such as a process, department, or product. Direct costs include material, labor, fuel, and power. Indirect Expense is a cost incurred in joint usage and difficult to identify with a specific cost object or center. Indirect expense includes advertising, security, maintenance, and supervision. They are usually grouped under fixed costs.
Manufacturing versus Administrative Expense - The costs necessary to convert the raw materials in the finished product. They are typically divided into three categories – direct materials, direct labor, and factory overhead/manufacturing overhead. Administrative expense are a part of the
