Cost of goods sold cogs may also be referred to as cost of sales. The allocation base is used to measure and quantify activities. Entering into the accounting field can be a little confusing at first with all of the new terminology to learn. Legally speaking, however, very few combinations of accounting firms are true mergers. Here is big red books definition of common accounting terminology. A record that holds the results of financial transactions. Managerial or management or cost accounting terms and definitions. Glossary of utility finance and accounting terms used in our seminars letters in parenthesis, preceding the definition, identify the sources used in compiling the glossary. Mergers and acquisitions distinguishes the difference between a merger or an acquisition.
To understand the meaning of cost accounting, there is need of explaining certain related terms also. Cost accounting generates information so as to keep a check on operations, with an aim of maximizing profit and efficiency of the concern. This paper investigates the choice of accounting method in a sample of 373 combinations between uk quoted companies during the period 1976 to 1987. In a pooling of interests, two entities merge through an exchange of. Cost accounting page 5 module i introduction cost accounting is a branch of accounting and has been developed due to limitations of financial accounting.
Under the companies acts, the combination of two businesses can be regarded as a merger only if it involves a direct exchange of equity shares for the other companys equity shares. The figure calculated in a trading account to represent the cost of goods sold in that accounting period. It consist its own principles, concepts and conventions which may vary from industry to industry. The different methods adopted for this cost calculation are the replacement cost method. This topic defines the key terms that are used in cost accounting. Plain language definitions with sample applications.
Activity cost cost associated with different types, or levels of activities. It is typically a quantity, such as square meters occupied, number of employees, or manhours used. Both groups of shareholders retain their shares as before as there is no acquisition i. The costing glossary provides definitions for terminology used in the different documents that make.
It builds on the environmental accounting glossary prepared in 20 by. This glossary explains the terminology and methodology used in collecting. The benefits of synergism, efficiency and market power associated with a merger may be realized at some point in the future, but real spending commitments e. There are some differences between these two accounting methods which are discussed in the following page. Financial accounting is primarily concerned with record keeping directed towards the preparation of profit and loss account and balance sheet.
In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period. This arrangement makes easy to find your desired managerial accounting terms and their accounting definitions. Gao05734sp a glossary of terms used in the federal budget. D days sales in inventory days sales in receivables days sales uncollected debenture debit debit memorandum debtors declining amortization depletion. Merger and acquisition accounting is done either by the purchase or pooling of interests methods. It seems that every week, there is news of another merger within the accounting profession. The amount of cash or cash equivalents paid or the fair value of the other consideration given t o. It joined an earlier standard, the pooling of interests approach, which was thrown out by the accounting industry back in 2001.
Unit level, batch level, product level, customer level and business level. Structure of a business, including mergers and acquisitions. Cost accounting is an accounting method that aims to capture a companys costs of production by assessing the input costs of each step of production as well as fixed costs, such as depreciation of. Credit the righthand side in the doubleentry method of bookkeeping. Chapter 4 contains a complete list of chart of accounts codes coa codes a. It is relatively easy to structure a combination to qualify for merger accounting in the uk. The choice of accounting method in uk mergers and acquisitions. The wealthhow article below provides a glossary of accounting terms and definitions that are most commonlyused.
For example, two departments, with 20 and 10 employees. Learn vocabulary, terms, and more with flashcards, games, and other study tools. A financial statement that summarizes the revenues, expenses, and results of operations for a specified period of time. The differences between the acquisition method and the.
In another example, the cost of factory rent and rates may be allocated to products based on the amount of factory space that their production takes up. Managerialmanagementcost accounting terms and definitions. An aggregation of actions performed within an organization that is useful for purposes. Glossary of financial accounting terms pearson education. The consolidated income statement includes the results of each of the combining entities or. Accounting terms accounting dictionary accounting glossary largest online accounting dictionary over 4,200 accounting terms. However knowing what these terms mean is critical to understanding the performance of your business. Days creditors outstanding this is a means of checking how a business is paying its creditors as compared to negotiated payment terms. Defining mergerrelated expense internal control over financial reporting. Method of reporting financial activity of a business financial transactions recorded in an. Following are the most important managerial or management or cost accounting terms. Accounting introduction naccounting is the art of identifying, measuring, recording, and communicating economic information about an organisation or other entity, in.
The generally accepted accounting principles must permit the use of merger accounting for that kind of business combination per frs 6. The difference between product costs and period costs. Page 1 of 5 glossary of cost accounting terms established in sffas 4, managerial cost accounting concepts and standards for the federal government activity the actual work task or step performed in producing and delivering products and services. In other words, two or more companies are consolidated into one company. Mel king institute definitions of accounting terms for. Determining the costs of products, processes, projects, etc. If youre looking for an overview of the most important terms and principles for. Start a free trial of quizlet plus by thanksgiving lock in 50% off all year try it free. Assisting management in the planning and control of the organization. Accounting terminology guide over 1,000 accounting and finance terms a b c.
Some of the key accounting requirements under asc 805 are as follows. Purchases from creditors on credit terms not cash divided by 365 equals average daily credit purchases. The glossary contains definitions of accounting, reporting, and auditing terms that are. Read this article to learn about the definitions, objectives, functions and objections of cost accounting. Start a free trial of quizlet plus by thanksgiving. Harold averkamp cpa, mba has worked as a university accounting instructor, accountant, and consultant for more than 25 years. Merger is the fusion of two or more companies or merger is a combination of two or more companies into a single. Other comprehensive basis of accounting ocboa consistent accounting basis other than generally accepted accounting principles gaap used for financial reporting. Includes obligations arising from t he terms of the acquisition agreement, terms of the acquirees awards, or. Examples of manufacturing product costs are raw materials used, direct labor, factory supervisors salary, and factory utilities. The expense recognized in writing off the cost of a plant or machine over its useful life, giving consideration to wear and tear. Accounting termsaccounting dictionaryaccounting glossary. Anything is possible with regard to the terms of a mergerbut there will.
Dynamics 365 for finance and operations is now being licensed as dynamics 365 finance and dynamics 365 supply chain management. Consolidated financial statements financial statements of a group in which assets, liabilities. Items representing two concepts within the cost of goods sold. Accounting guideline on merger accounting is set out in paragraphs 121. Accounting glossary freeagent get a handle on what your accountant is on about with our easy az of accounting and bookkeeping terms especially for freelancers and small business owners. Towers, principles of management, springer texts in business and.
In a time when economies are more and more globalized, more inter connected and facing economical financial issues that tend to spread in a fast and even violent. This december 1998 version of the glossary of acquisition terms was prepared by the. The acquired banks allowance for loan losses in an acquisition may not be carried over. The volume point of sales at which revenues and costs are equal. An aggregation of actions performed within an organization that is useful for purposes of activitybased costing. If such a merger goes through, the acquired firms owners might not see a pro rata increase in compensation compared to the growth in revenues they help create.
The nysscpa has prepared a glossary of accounting terms for accountants and. Accounting terminology can be quite a mouthful and hard to remember, especially if you dont have much prior experience with financial or management accounting. All of the following accounting terms have precise definitions when used in business. Conversely, financial accounting ascertains the financial results, for the accounting period and the position of the assets and liabilities on the last day of the period. Accounting and tax issues in terms of the merger through absortion steliana busuioceanu1 abstract. Approved costing guidance glossary nhs improvement. Mergers and acquisitions of accounting firms the cpa journal. Important terms and principles cost accountants should know.
Accounting and tax issues in terms of the merger through. Exposure draft accounting guideline on merger accounting comments to be received by 31 may 2005. Glossary of accounting terms and definitions wealth how. Corporations currently operate on a fiscal year beginning on july 1st and ending june 30th. Whether you are an analyst, business person or accounting student, audit the records of a corporation, a business manager, or balance your own checkbook, you will find the ventureline accounting dictionary of accounting terms of immeasurable assistance. Accounting period expenditure and revenue measurement within a predetermined time frame. The concept that many transactions and events are to be measured and reported at acquisition cost. Bookkeeping and accountancy deal with maintaining record of all the transactions that a businessindividual makes. This is a term used in old accounting systems and not used much these days.
Examples include an income tax basis or a cash basis. Check out the accounting terms below and find out what that last conversation was about. Basis is generally the cost paid for an asset plus the amounts paid to improve the asset less deductions taken against the asset, such as depreciation and amortization. In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. Statement of financial accounting standard sfas no. Budget authority includes the credit subsidy cost for direct loan and loan. It builds on the environmental accounting glossary prepared in 20 by wassim youssef, volunteer of the said division. Cost accounting is a practice of cost control which is as follows. Getting merger and acquisition accounting right presented by john donohue, partner and anthony porter, senior manager. However, these transactions bring challenges and complexities with the related purchase accounting. General accounting terms and definitions accounting cycle composed of several accounting periods spanning over twelve consecutive months.
List of key accounting terms and definitions if you want to start a business, get better at running your business, or get an accounting job, you need to know some essential financial accounting terms and concepts. Conditions for merger accounting to be permitted i. For more information about these licensing changes, see dynamics 365 licensing update. Mergers and acquisitions are accounted for under fasb asc 805 business combinations. What is the accounting treatment of expenses incurred for merger like solicitor fees registration fees stamp paper charges whether itshould be treated as preliminary expenses or should be charged toprofit loss a c as merger expenses accounts. Glossary of cost accounting terms established in sffas 4, managerial cost accounting concepts and standards for the federal government activity the actual work task or step performed in producing and delivering products and services. Use of merger accounting recognises this by accounting for the combining entities or businesses as though the separate entities or businesses were continuing as before.
However, the main benefit of merger accounting is also available. The first function is to control the cost within the budgetary constraints. Cost has been defined in the terminology given by the chartered institute of management accountants cima as the amount of. The standards, rules, guidelines, and industryspecific requirements for financial reporting. The wealthhow article below provides a glossary of accounting terms and. Some examples include accounting and financial reporting for common control or puttogether transactions, assessing the necessity for pushdown accounting and distinguishing between equity and cost method investments. An acquisition is a business combination that is not a merger. The nysscpa has prepared a glossary of accounting terms for accountants and journalists who report on and interpret financial information. Systems that combine activity, financial and operational data to cost. An easy az of accounting and bookkeeping terms for small business owners. Accounting accounting is a difficult term to define. Cost and management accounting terms defined with some examples and links for more information. A credit either increases a liability or equity account, or decreases an asset or expense account.
Mergers and acquisitions for nonprofits accounting. Mergers and acquisitions terms 338h10 election a section 338h10 election allows an acquiring corporation to treat its acquisition of the stock of a subsidiary corporation or an s corporation as an acquisition of assets followed by a taxfree liquidation, often resulting in a steppedup basis for such assets. A method of accounting for a business combination that could be used as an alternative to acquisition accounting when a business combination fell within the definition of a merger in frs 6 and regulations made under the companies act 2006. For example, you may hear the terms revenues and receipts used interchangeably in casual office conversation. Cost accounting is the art and science of recording, classifying, summarizing, and analyzing costs with the objective of cost control, cost calculations and projections and cost reduction thereby helping management make prudent business decisions. Accounting terminology guide over 1,000 accounting and. Merger two organisations agree to work together in a situation where. Fixed costs decrease because merged companies can eliminate departments. Modern accounting systems tend to use open ended accounting.
Dont feel left out in conversations and dont be left behind because you arent sure what someone is talking about. Concept of cost cost is a measurement, in monetary terms, of the amount of resources used for some purposes. Most transactions are legally structured as an acquisition, wherein the acquiring firms owners assume ownership of the acquired firm. He is the sole author of all the materials on accountingcoach. Allocation key the allocation key is the basis that is used to allocate costs.
Exposure draft accounting guideline on merger accounting. Accounts combine several codes in the uniform codes manual such as the general ledger code. List of key accounting terms and definitions investorguide. There are some differences between these two accounting methods. Mel king institute definitions of accounting terms for financial statements for cdcs 1. Administrative expenses costs of managing and running a business. Even though you may be familiar with some of them, it is important to know their exact meanings otherwise you may find yourself becoming confused. In accounting, all costs associated with the acquisition of an asset. Generally accepted accounting principlesthe standards and rules that accountants follow while recording and reporting financial activities creditor a person or business to whom a liability is owed. Clearly identifiable costs gives more detail on where. Glossary of cost accounting terms established in sffas 4. To learn more about accounting principles, see our accounting principles outline.
Financial statements records that outline the financial activities of a business, an individual or any other entity. Activitybased costing a cost accounting method that. In terms of accounts receivable, assign means to pledge accounts receivable to a lender as collateral for a loan. Mergers are accounted for on carryover basis similar to pooling accounting under. Cost accounting cost of goods sold cost of inventory cost principle coupon bonds credit credit memorandum credit period credit terms creditors crossfoot current assets current liabilities. However, it is purely an accountingnumerical phenomenon, and no value or synergies. If all 5 criteria are not met, this indicates that the accounting definition of. A merger is the combination of two companies into one by either closing the old entities into one new entity or by one company absorbing the other. The biggest difference between the acquisition and purchase method of accounting for mergers is that accounting dropped the purchase method more than a decade ago. Thats because cost accounting has many terms that are not used in other areas of accounting financial accounting and management accounting, to name a few. Costs of mergers and acquisitions are calculated in order to check to the viability and profitability of any merger or acquisition deal.
The purchase of the controlling interest or ownership of another company. Specifically, this current merger boom is characterized by horizontal consolidation with significant potential for cost synergies. Thus cost represents the amount of resources given up to obtain a given object or objective. Many accountants will tell you that cost accounting is the most difficult accounting subject to learn. These terms are taken from cfis advanced financial modeling course on mergers and acquisitions modeling. An improvement in per share metrics posttransaction after issuing additional shares. A program budget expresses the operating plan in terms of the costs of activities. Cogs is the calculation of all costs involved in selling a product to customers. Finance cop briefing paper college development network. Costing terminology product costs are those costs assigned to an inventory account that eventually become part of cost of goods sold. Accounting equation the relationship between assets, liabilities and ownership.
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