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Online Accounting Dictionary
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Period costs are costs associated with a specific period and not a specific product. Period costs include selling and administrative expenses.
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Periodic inventory system adjusts the inventory account only at the end of an accounting period. Purchases and sales do not affect the inventory account during the accounting period, but do affect at the period end.
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Permanent accounts are balance sheet accounts. They are not closed each period. Their balances are carried forward into the next period. Permanent accounts are also called real accounts.
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Perpetual inventory system means that the inventory account is adjusted perpetually. The inventory account is affected each time inventory is sold or purchased.
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Posting is the process of transferring the accounting information from journals to the ledger. For example, all information from a cash journal is posted to the ledger to update the cash account(s).
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Prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed. Prepaid expenses are usually shown in the assets section on the balance sheet.
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Prepaid insurance is used to keep track of cash paid for insurance coverage that has not been expensed. Prepaid insurance is an asset account and presented in the assets section on the balance sheet.
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Prime cost is the combination of direct materials and direct labor.
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Principal is the amount initially invested (or borrowed).
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Process costing is a product costing system when costs are accumulated by departments or processes (e.g. Printing Department, Assembling Department) and assigned to a large number of homogenous, identical products. In other words, manufacturing costs are assigned to each process in each manufacturing department: assembling costs (including direct materials, direct labor, and factory overhead) in the assembling department; cost of printing (direct labor, direct materials, and factory overhead) in the printing department, etc. Process costing is usually used by companies characterized by continuous mass production (i.e. firms that produce one or a few homogenous products).
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Product costs are costs required to produce inventory and make it ready for sale. Such costs are directly associated with inventory production.
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Product-level activity (also called, a product- or service-sustaining activity) is an activity performed to support production of a specific product or service regardless of how many batches are run or how many items are produced.
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Property, plant, and equipment are tangible resources that are used in the operations of the company and are not intended for sale. Such assets are expected to provide services to the company for a number of years and therefore, considered long-term. Also referred to as fixed assets.
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Purchased intangibles are recorded at the cost incurred to purchase an intangible asset from another entity, which includes the acquisition costs as well as expenditures made to get the asset ready for its intended use (e.g. legal fees).
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