What is self-insurance? Author: Harold Averkamp, CPA, MBA Self-insurance means no insurance. For example, if a retailer decides to self-insure its buildings, the retailer will not have an insurance policy to pay for...
What is self-insurance? Author: Harold Averkamp, CPA, MBA Self-insurance means no insurance. For example, if a retailer decides to self-insure its buildings, the retailer will not have an insurance policy to pay for...
No insurance. If a company chooses to self insure for fire damage, it does not have insurance for fire damage. Companies with a chain of stores in various cities may decide not to have insurance, since their risk is...
A person who is considered to be both the employer and the employee. For example, the sole owner of a sole proprietorship is self-employed.
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
What is prepaid insurance? Author: Harold Averkamp, CPA, MBA Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a...
Life insurance without a cash value.
What is insurance expense? Author: Harold Averkamp, CPA, MBA Definition of Insurance Expense Under the accrual basis of accounting, insurance expense is the cost of insurance that has been incurred, has expired, or has...
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...
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for...
formed company paid $600 on December 30 for liability insurance for the six months that begins on January 1. For the next two days, none of the $600 will be reported as an expense. Instead, all $600 of cost is being...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
This current liability account reports the amount a company owes as of the balance sheet date for its worker compensation insurance policy premiums. The amounts owed are usually based on the policy’s rates for the...
Are insurance premiums a fixed cost? Author: Harold Averkamp, CPA, MBA The cost of the insurance premiums for a company’s property insurance is likely to be a fixed cost. The cost of worker compensation insurance is...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
What is workers' compensation insurance? Author: Harold Averkamp, CPA, MBA Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for...
What is the self-employed person's FICA tax rate for 2022 and 2023? Author: Harold Averkamp, CPA, MBA 2022 FICA Tax Rate for Self-Employed The self-employed person’s FICA tax rate for 2022 (January 1 through...
One of the amounts used in determining the amount of interest to be capitalized when a company self-constructs certain long-term assets.
How do you record a payment for insurance? Author: Harold Averkamp, CPA, MBA Definition of Payment for Insurance A company’s property insurance, liability insurance, business interruption insurance, etc. often covers a...
U.S. social security system.
Why is prepaid insurance a short term asset? Author: Harold Averkamp, CPA, MBA Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums...
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
, the annual wage limit is $160,200. (It was $147,000 for 2022.) This means that in the year 2023, only the first $160,200 of an employee’s gross wages, salaries, bonuses, etc. (or self-employed’s business earnings)...
Why would Prepaid Insurance have a credit balance? Author: Harold Averkamp, CPA, MBA Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance...
cost? Why is the distinction between product costs and period costs important? Is the rental cost of a building considered overhead? Under accrual accounting, how are worker comp premiums handled? What are...
that will not require a payment in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold...
How do you account for payroll withholdings for health insurance? Author: Harold Averkamp, CPA, MBA Definition of Payroll Withholdings for Health Insurance Payroll withholdings for health insurance are the amounts...
entry will increase the normal balance. [Recall that liabilities are on the right side of the accounting equation. Credit entries appear on the right side of a T-account.] 3. What type of entry will increase the normal...
is a fringe benefit rate? Where should I enter unpaid wages? What is recorded in the Wages and Salaries Expense account? What is payroll accounting? What is accrued payroll? Are payroll withholding taxes an expense or a...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
What are the two methods for recording prepaid expenses? Author: Harold Averkamp, CPA, MBA Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense...
as to when a cost will be reported as an expense. Example of a Cost A company’s property insurance bill for the next six months of insurance shows a cost of $6,000. Initially the cost of $6,000 is reported as the...
How do I record money received for an insurance claim on inventory loss? Author: Harold Averkamp, CPA, MBA Definition of Money from Insurance Claim for Inventory Loss Let’s assume that a company has insurance on its...
Under accrual accounting, how are worker comp premiums handled? Author: Harold Averkamp, CPA, MBA Worker comp insurance premiums should be charged to the areas where the related wages and salaries are charged. Let’s...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
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