What are interim financial statements? Definition of Interim Financial Statements Interim financial statements report amounts for time intervals that are shorter than a company’s annual financial statements. The...
What are interim financial statements? Definition of Interim Financial Statements Interim financial statements report amounts for time intervals that are shorter than a company’s annual financial statements. The...
What is zero-based budgeting? Definition of Zero-Based Budgeting Zero-based budgeting, or ZBB, is a rigorous budgeting process that requires that every dollar of every expense in the budget be justified, even if the...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
What is the payout ratio? The payout ratio indicates the percentage of a corporation’s earnings which are distributed as cash dividends to its stockholders. Typically, the payout ratio is computed by using the per...
What is preferred stock? Definition of Preferred Stock Preferred stock is a type of capital stock issued by some corporations in addition to its common stock. Preferred stock is also known as preference stock. The word...
What is the units of activity depreciation? Definition of Units-of-Activity Depreciation The units-of-activity depreciation is unique among the common methods of depreciation in that the useful life of the asset being...
What is self-insurance? 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 losses that may occur to its...
Why are expenses debited? Why Expenses Are Debited Expenses cause owner’s equity to decrease. Since owner’s equity’s normal balance is a credit balance, an expense must be recorded as a debit. At the end of the...
What is the production volume variance? Definition of Production Volume Variance The production volume variance is associated with a standard costing system used by some manufacturers. This variance arises when there is...
How do you calculate ending inventory? Physically Counting the Items in Inventory One method for calculating the cost of a company’s ending inventory is to 1) physically count the quantity of each of the items in...
What is the difference between correlation and cause and effect? Definition of Correlation Correlation refers to the association between two or more variables. The association is measured by a statistic known as the...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
Where do worker compensation insurance costs get reported on the financial statements? Worker compensation insurance costs (also referred to as worker comp) should appear on the income statement and also on the balance...
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...
Under the accrual method of accounting, this account reports the amount of wages that the delivery employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
The amounts withheld for employees’ checks for Social Security tax, Medicare tax, federal income tax, state income tax, and voluntary deductions such as United Way, union dues, 401(k) contributions,...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s 401(k) plan associated with the employees in the delivery department during the period indicated in the...
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
An income statement with at least two columns of amounts. The column of amounts that is closest to the words will contain the amounts for the most recent period of time. The columns furthest from the words will be the...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
Under the accrual method of accounting, this account reports the amount of wages that the warehouse employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...
An income statement account that reports the amount of service revenues earned during the time interval indicated in the heading of the income statement. (Under the accrual basis of accounting, fees earned are reported...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s 401(k) plan associated with the employees in the warehouse department during the period indicated in the...
What is meant by nonoperating expenses and losses? Definition of Nonoperating Expenses and Losses Nonoperating expenses are business expenses that are outside of a company’s main or central operations. (Some describe...
If we dispose of an asset, will there be a change in the owner's equity? The owner’s equity of a sole proprietorship will change only if the disposal of an asset causes a gain or loss to be reported on the income...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The surcharges...
Featured Review
"I currently serve as the CFO for a nonprofit organization, as well as running a small business providing bookkeeping and financial advisory services to small businesses. Prior to this, I worked as the financial controller for a family of companies with consolidated revenues of $85 million. I stumbled across AccountingCoach 10+ years ago and it quickly became my go to for clear and concise explanations. I downloaded different versions of the cheat sheets and tests to utilize when onboarding accounting staff. I upgraded to PRO in order to gain access to the additional material. I still use this site to refresh my memory on some terms or processes. I have not found any other site where I can get straightforward and easy-to-understand answers as quickly and concisely. The forms and templates are an invaluable resource. I recommend AccountingCoach to associates and clients as the go-to site for instruction for their bookkeeping and accounting staff." - LaRay S.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: