Dictionary of...Accounting Terms
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T-account
- A visual aid used by accountants to illustrate a journal entry's effect on the general ledger accounts. Debit amounts are entered on the left side of the "T" and credit amounts are entered on the right side.
take-home pay
- The amount an employee "clears" on her or his payroll check. It is also the "net" amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for union dues, employee share of health care costs, charitable deductions, garnishments, etc.
tangible constructed asset
- Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
target interest rate
- See hurdle rate.
tax depreciation
- The depreciation used on a company's income tax return. Usually this is different from the depreciation used on the financial statements.
taxes payable
- A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
telephone expense
- The cost of telephone service that was used during the period shown on the income statement.
temporary accounts
- Accounts that are closed at the end of each accounting year. Included are the income statement accounts (revenues, expenses, gains, losses), summary accounts (such as income summary), and a sole proprietor's drawing account.
temporary help expense
- The amount of temp help costs that were used during the time interval indicated in the heading of the income statement.
temporary service expense
- Under the accrual basis of accounting, this account reports the cost of the temporary help services that a company used during the period indicated on its income statement.
temporary investments
- A current asset account which contains the amount of investments that can and will be sold in the near future.
temporary marketable securities
- Generally, securities that can be sold quickly in the stock or bond market and where the investor's intention is to sell them within one year of the balance sheet date.
term bonds
- Bonds with one maturity date (as opposed to serial bond).
term insurance
- Life insurance without a cash value.
time-and-a-half
- Also known as time-and-one-half. A term used in conjunction with overtime pay when an employee gets a 50% higher pay rate for hours in excess of 40 hours per week. The "half" is also known as the overtime premium. For example, an employee earning $8 per hour is required to work 41 hours this week. The employee will earn $320 for the first 40 hours ($8 times 40) plus $12 (150% of $8) for the 41st hour—for a total of $332. The total can also be computed as 41 hours times the straight-time rate of $8 = $328 plus the $4 overtime premium (the half of $8)—for a total of $332.
time deposits
- Savings accounts and certificates of deposits at a bank.
time period assumption
- Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time period covered is included in the heading of the income statement, statement of cash flows, and the statement of stockholders' equity.
time value of money
- The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a prudent decision. To learn more, see Explanation of Evaluating Business Investments.
times interest earned
- A financial ratio that compares a company's interest expense to the company's income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the future. To learn more, see Explanation of Financial Ratios.
timing differences
- Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment on the financial statements over a ten-year period using the straight-line method. However, for income tax purposes the company uses the IRS's seven-year, accelerated depreciation method. Eventually, the total depreciation will be the same; however, each year for ten years there will be differences due to the timing of the depreciation.
Tony Mandella, Capital
- The owner's equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor's draws since the company was started. The current year's net income and draws are usually in temporary accounts and will be transferred to the capital account at the end of the year.
trade accounts payable
- See accounts payable.
trade accounts receivable
- Receivables due from customers. See accounts receivable.
trade discount
- A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000, and still others buy less than $10,000 per year. The company would probably have lower selling prices for the large-volume resellers and have higher selling prices for the low-volume resellers. One way to achieve this is to have a catalog showing just one selling price for each item, but to offer varying discounts--depending on the volume purchased. That discount is known as a trade discount.
trade-in of similar assett
- See exchange of similar nonmonetary assets.
trademark
- An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U. S. Patent and Trademark Office. Also see trade names.
trade names
- An intangible asset reported on the balance sheet at the company's cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but the trade names are often the most valuable assets of the company. Trade names should be registered with the U. S. Patent and Trademark Office.
trade payables
- Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
trade receivables
- Receivables due from customers. See accounts receivable.
transaction approach to determining net income
- Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which determines the amount of net income by examining the change in owner's equity from the beginning of the accounting period to the end of the accounting period.) Accounting follows the transaction approach.
transfer price
- The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
transferred-in cost
- In process cost accounting this is the cost transferred from one department to the next department in a manufacturing process.
transportation-in
- See freight-in.
transportation-out
- Also known as freight out or as delivery expense. This is an operating expense futher classified as a selling expense. It results when merchandise is sold with terms of FOB destination.
treasury bills
- See U.S. Treasury bills.
treasury stock
- A corporation's own stock that has been repurchased from stockholders. Also a stockholders' equity account that usually reports the cost of the stock that has been repurchased.
trial balance
- A listing of the accounts in the general ledger along with each account's balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the credit column.
trial net lease
- A lease where the lessee/tenant pays not only rent, but also the property taxes, insurance, and maintenance.
turnover ratios
- A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average Inventory balance. The Accounts Receivable turnover is Sales divided by the average Accounts Receivable balance. To learn more, see Explanation of Financial Ratios.
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