A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
The one-year period ending at an organization’s typical low point of activity. For example, a school’s natural business year is July 1 through June 30. It is practical to have the accounting and financial...
obligations when they come due. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to...
A stated legal amount for each share of common stock. The par value for every share of common stock issued must be recorded in the separate stockholders’ equity account Common Stock.
A highly summarized income statement
This term is usually associated with assets that are depreciated. In the month that an asset is acquired or disposed, it is assumed to have occurred in the middle of the month.
with its suppliers, the company will have the benefit of having a larger cash balance (even though the amount of working capital will not change). Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
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...
One of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities,...
revenues with a limited amount of expenses. In short, the financial statements provide only some of the information needed when attempting to determine the value of a business. Join PRO to Track Progress Mark the...
A current liability account which reflects the amount of income taxes currently due to the federal, state, and local governments.
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
is the creditor. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter the...
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
One of two broad functional categories for sorting and reporting a nonprofit organization’s expenses. (The other is program expenses.) Supporting services expenses consists of 1) management and general expenses,...
How do you record the interest that is unpaid on a note payable? Definition of Interest Unpaid on Note Payable Interest that has occurred, but has not been paid as of a balance sheet date, is referred to as accrued...
A table showing the present value factors to be applied to the constant amount occurring at the beginning of each equal time interval. Also known as the present value table for an annuity in advance.
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
The amount by which the proceeds from the sale of an automobile used in the business exceeded its carrying amount at the time it is sold.
A statement that shows the changes in retained earnings from one point to another.
Under this method, net income is determined by analyzing the change in owner’s equity. The alternative is the transaction approach in which each transaction is recorded, sorted and stored.
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
account Accumulated Depreciation. Examples of Capital Expenditures Examples of capital expenditures include the amounts spent to acquire or significantly improve assets such as land, buildings, equipment, furnishings,...
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
What is depletion? Definition of Depletion In accounting, depletion refers to the expensing of a company’s cost of a natural resource. Ultimately, it means moving a natural resource’s cost from the company’s...
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
See job order cost sheet.
The amount owed to employees as of a specified date for the amount of vacation pay that has been earned but has not been taken. For example, the accrued vacation pay as of December 31, 2023 is the amount the employees...
A requirement that the receiving nonprofit organization must return an asset to the donor in the event that some future and uncertain event does or does not occur.
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
A corporation’s total stockholders’ equity (excluding preferred stock) divided by the number of shares of common stock outstanding.
An asset account used to record a loan to another party that has real estate as collateral.
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
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...
Featured Review
"I'm setting up a small business and needed to refresh my accounting skills. The lifetime PRO Plus membership is one of the smartest purchases I've ever made. For such a low price, my work here has already yielded significant professional advancement accompanied by a higher salary. The extraordinarily clear and engaging explanations make self-study possible for anyone with an interest in accounting. I simply can't recommend it enough." - Pattie W.
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: