To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
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.
Generally a long term liability account containing the face amount, par amount, or maturity amount of the bonds issued by a company that are outstanding as of the balance sheet date. To learn more about bonds payable,...
This current liability account reports the amount a company owes (must remit) for its employees’ Social Security and Medicare taxes as of the date of the balance sheet.
A word to describe whether a company is able to earn more revenues than expenses.
The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.
Often referred to as fixed assets. This would include long term assets such as buildings and equipment used by a company. Plant assets (other than land) will be depreciated over their useful lives.
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
A request by the petty cash custodian for a company check in order to return the amount of currency and coins in the petty cash box to the amount shown in the general ledger account.
A negative balance in the bank’s records for the company’s checking account.
Income or revenue earned by a company that is outside of its main operating activities. For a retailer the interest earned on its temporary investments is a nonoperating revenue (or nonoperating income).
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
Also referred to as footnotes. These provide additional information pertaining to a company’s operations and financial position and are considered to be an integral part of the financial statements. The notes are...
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
A financial statement that reported the changes in a company’s working capital. The funds flow statement has been replaced by the statement of cash flows.
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
This current liability account reports the amount of interest the company owes as of the date of the balance sheet. (Future interest is not recorded as a liability.)
The amount a company owes for expenses or losses incurred that have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting Entries.
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
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 weighted-average of the cost of a company’s debt, common stock, and preferred stock.
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
The book value of a company equal to the recorded amounts of assets minus the recorded amounts of liabilities. To learn more, see Explanation of Balance Sheet.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
A liability account that reflects the estimated amount a company owes for expenses that occurred, but have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
The account in which the owner’s investment is recorded plus the net income earned by the company minus the draws made by the owner. Current year net income and draws will be in temporary accounts until the end of...
Allowing a person or company to purchase goods or services without paying cash at the time of purchase.
A term that refers to a negative checking account balance. It arises when a company writes checks in excess of the amount it has on deposit in its checking account.
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
Raw materials that are a traceable component of a manufactured product. For example, the direct material of a baseball bat is the wood. Flour, sugar, and vegetable oil are direct materials of a company that manufactures...
Sending work to another organization instead of processing the work in-house. Often payroll is outsourced to a company that specializes in payroll processing.
Usually a department within a company that is responsible for its costs but not revenues or profit.
Preferred stock that can be exchanged by the holder for a specified number of shares of common stock of the same company.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
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