P & L:
The abbreviation for profit and loss statement. Also known as the income statement.
paid-in capital :
The amount paid or contributed by stockholders in exchange for shares of a corporation's stock.
In accounting this word is often included in the title of liability accounts. It means the amount owed by a company as of the balance sheet date, even if the company did not yet receive an invoice from the supplier. For example, the electric utility furnishes electricity for the month of January, but does not read the meter until February 1 and sends the invoice or bill on February 4. The company pays the bill on March 1. The electricity used in January is a payable or obligation on January 31
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the time value of money.
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of money.
The person or organization to whom a check is written.
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs remain in inventory
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold. The oldest costs remain in inventory
perpetual average :
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item.
The first-in, first-out cost flow assumumption under the perpetual inventory system. The first (oldest) costs are the first costs removed from inventory at the time that goods are sold. The most recent costs will remain in inventory. The results are the same as periodic FIFO.
perpetual LIFO :
The last-in, first-out cost flow assumption under the perpetual inventory system. The last (most recent) costs as of the time that goods are sold are the first costs removed from inventory. The oldest costs as of the time of the sale will remain in inventory. The results will be different from periodic LIFO.
perpetual system of inventory:
The inventory system where purchases are debited to the inventory account and the inventory account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in the inventory account is constantly or perpetually changing. Under this system there is a general ledger account Cost of Goods Sold
petty cash: A cash account that businesses keep on hand for unexpected expenses.
Recording an entry in an account in the general ledger or in a subsidiary ledger.
prepaid advertising :
A current asset that reports the amount paid for advertising that has not yet taken place. When the advertising occurs the prepaid advertising is reduced and advertising expense is recorded.
prepaid dues :
A current asset that reports the amount paid for dues that have not yet expired. As the prepaid dues expire, the account Prepaid Dues is reduced and dues expense is increased.
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date.
A related account is Insurance Expense, which appears on the income statement. The amount in the Insurance Expense account should report the amount of insurance expense expiring during the period indicated in the heading of the income statement
A current asset account that reports the amount of future rent expense that was paid in advance of the rental period. The amount reported on the balance sheet is the amount that has not yet been used or expired as of the balance sheet date.
present value :
Future amounts that have been discounted to the present.
price variance :
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
In financial accounting this term refers to the amount of debt excluding interest. Payments on mortgage loans usually require monthly payments of principal and interest.
principal payment :
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is applied to the principal balance.
The combination of direct materials and direct labor.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
product cost :
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer's product cost is the net cost from suppliers plus costs to get the product in place and ready for use (e.g. freight-in
promissory note :
A formal, written promise to pay interest and to repay the principal amount.
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods inventory, and the cost of goods sold. The proration is based on each categories' amount of standard materials cost from the period of the variances.
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 amount of purchases of merchandise. Net purchases is the amount of purchases minus purchases returns, purchases allowances, and purchases discounts.
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid within 10 days). When the credit balance of this account is combined with the other purchases accounts, the result is the amount of net purchases.
purchases returns and allowances :
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not returned. When the credit balance of this account is combined with the other purchases accounts, the result is the amount of net purchases.