See discounted cash flow model.
See discounted cash flow model.
What is a classified balance sheet? Definition of Classified Balance Sheet A classified balance sheet arranges the amounts from a company’s balance sheet accounts into a format that is useful for the readers. For...
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
See Statement of Financial Accounting Standard No. 121. Under this standard if the undiscounted future cash flows from the asset (including sale amount) are less than its carrying amount, a loss is recognized. The amount...
See payroll taxes payable.
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
A liability account that reports an insurance company’s premiums received from its insured that have not yet been earned. For example, if the insurance company receives $600 on January 27 for an insured’s...
A multicolumn listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of...
The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
How do you calculate accrued vacation pay? Definition of Accrued Vacation Pay Accrued vacation pay is the amount of vacation pay that a company’s employees have earned, but the company has not yet paid. Example of...
See pass-through contributions.
This term is often associated with an investment in the bonds issued by another corporation if the bonds are traded on a bond exchange.
See death spiral.
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...
What is the difference between stock dividend and cash dividend? Definition of a Stock Dividend A stock dividend is a dividend consisting of additional shares of stock. Assume that before a corporation declares a stock...
A retirement plan that does not specify the amount that a retiree will receive. Rather, the employer’s obligation is to contribute a specific amount into a fund to be used for payments to retirees.
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
A balance sheet line to report short-term liabilities that are too insignificant to be identified separately.
Taxes assessed by states to cover unemployment benefits paid to unemployed workers who have been laid off or terminated by a company for specified reasons. This tax is paid by the employer but is computed by multiplying...
The net amount of gross sales on credit minus the sales returns, sales allowances, and sales discounts which pertain to the sales on credit.
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
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...
A contra liability account containing the amount of discount on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
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...
What is the net method? Definition of Net Method In accounting, the net method likely refers to the way a company records each vendor’s invoice that offers an early payment discount. Example of Net Method Assume that a...
A stockholders’ equity account with a credit balance. The credit balance results when a corporation sells some of its treasury stock for an amount that exceeds the corporation’s cost of the treasury stock...
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
The supplier of goods or services.
Financial statement and other financial information distributed to people outside of a company.
This classification of net assets has been replaced by the FASB with the classification net asset with donor restrictions.
What is a purchase allowance? Definition of Purchase Allowance A purchase allowance is a reduction in the buyer’s cost of merchandise that had been purchased. The purchase allowance is granted by the supplier because...
The amount by which the proceeds from the sale of investments exceeded the carrying amount of the investments that were sold. It is reported as a non-operating or “other” item on a multiple-step income...
The term that refers to the stock of a corporation which is traded on the stock exchanges (as opposed to stock that is privately held among a few individuals).
See double declining balance method of depreciation.
The amount that would be agreed upon by two independent persons. The amount to be received in the ordinary course of business in an arm’s length transaction.
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