Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
What is par value? Definition of Par Value Par value is a per share amount that will appear on some stock certificates and in the corporation’s articles of incorporation. (Some states may require a corporation to have...
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires that...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
What is payroll accounting? Definition of Payroll Accounting Payroll accounting involves a company’s recording of its employees’ compensation including: gross wages, salaries, bonuses, commissions, and so on that...
What is transfer pricing? Definition of Transfer Pricing Transfer pricing involves setting a price that will be used when one responsibility center of a company sells goods or services to another responsibility center of...
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
What is principles of accounting? Three meanings come to mind when you ask about principles of accounting… Principles of accounting was often the title of the introductory course in accounting. It was also common for...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
What is interest payable? Definition of Interest Payable Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. [Interest payable...
What are bonds payable? Definition of Bonds Payable Bonds payable are a form of long term debt usually issued by corporations, hospitals, and governments. The issuer of bonds makes a formal promise/agreement to pay...
What are wages payable? Definition of Wages Payable Wages payable refers to the wages that a company’s employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely...
The depreciation method based on the number of units produced by the asset rather than on the passage of time. This method is also referred to as the units of activity method because depreciation is based on some...
This current liability account reports the amount a company owes the state governments as of the balance sheet date for the state income taxes withheld from its employees’ salaries and wages.
What are payroll withholding taxes? Definition of Payroll Withholding Taxes In the U.S. payroll withholding taxes are the taxes that an employer is required to deduct from its employees’ gross wages, salaries, bonuses,...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
This current liability account reports the amount a company’s employees have earned in holiday pay, vacation pay, and sick days but have not yet taken as of the date of the balance sheet.
What is public accounting? Definition of Public Accounting Public accounting can be viewed as firms of accountants that serve clients such as businesses (retailers, manufacturers, service companies, etc.), individuals,...
See Explanation of Inventory and Cost of Goods Sold.
What is purchase discounts lost? Definition of Purchase Discounts Lost The account Purchase Discounts Lost is a general ledger account used by a company that records vendors’ invoices using the net method. A debit...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
What are production costs? Definition of Production Costs In managerial accounting and cost accounting, production costs are the costs that occur in the manufacturing facilities. Production costs are also referred to as...
The discounted value of a series of equal amounts occurring at the end of each equal time interval. To learn more, see our Present Value of an Ordinary Annuity Outline.
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
What is accounts payable? Definition of Accounts Payable Accounts payable involves the amounts owed by a company to its suppliers (vendors) for goods or services the company received on credit. Accounts payable is also...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
What is a sole proprietorship? Definition of Sole Proprietorship A sole proprietorship is a form of business organization that is owned by one person and is easy to start. The owner is referred to as a sole proprietor....
What are invoice payment terms? Definition of Invoice Payment Terms Invoice payment terms appear as part of the information shown on the invoice (or bill) prepared by a seller of goods or a provider of services....
Bookkeeping (Test for Prospective Employees #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers....
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
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...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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