This account shows the amount of delivery expense incurred (occurring) during the accounting period shown in the heading of the income statement. The title of this account could also be Freight Out or Transportation...
This account shows the amount of delivery expense incurred (occurring) during the accounting period shown in the heading of the income statement. The title of this account could also be Freight Out or Transportation...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
Billing a client based on the value of the information or service provided rather than billing based on time spent.
The planned or expected costs. Often used in manufacturing for accounting for inventories and production. When actual costs differ from the standard costs, variances are reported.
liability. When a company receives money in advance of earning it, the accounting entry is a debit to the asset Cash for the amount received and a credit to the liability account such as Customer Advances or Unearned...
Usually means to scrap a long-term plant asset and receive no proceeds from its disposal.
See inventory shrinkage.
An employee’s pretax compensation based on hours worked times an hourly rate of pay. Production workers and nonmanagement employees are usually paid wages. To learn more, see Explanation of Payroll Accounting.
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
A company might construct a building and then sell the building to an investor who in turn leases the building back to the company.
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...
of an Expense As a prepaid cost such as the $6,000 in the asset account Prepaid Insurance expires, the part that expires will be reported on the income statement as Insurance Expense. If the insurance cost is expiring...
(noncurrent) liability account Bonds Payable will be credited with the face value of the bond. Cash will be debited for the cash received, and any difference will be recorded in one or two of the following bond-related...
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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.
See equivalent units of production.
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
or to a corporation’s retained earnings account.) Why Service Revenues is a Credit Service revenues (and any other revenues) will increase a company’s owner’s equity (or stockholders’ equity). Owner’s equity...
the cost per unit. If there are 80 units in inventory at the end of the accounting period, the cost of the ending inventory and the cost of goods sold (using the periodic inventory system) are as follows: Amount from...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
A major repair such as an engine overhaul, which will extend the useful life of the asset. The amount should be recorded in the asset account and then depreciated over the remaining life of the asset.
To receive money in exchange for a promise to repay the amount to the lender.
A report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
To record accounting entries into a journal.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
Net sales revenues minus the cost of goods sold.
A stock split, such as a 2-for-1, means that every stockholder will have twice as many shares as was held previously. Accordingly, the market price per share after the split should be one-half of the market price...
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
See unrelated business income tax.
A stakeholder is anyone that has an interest or is affected by a decision. For example, some of the stakeholders of a state university include the students, students’ families, alumni, professors, custodians,...
One of the main financial statements. The balance sheet reports the assets, liabilities, and owner’s (stockholders’) equity at a specific point in time, such as December 31. The balance sheet is also referred...
See electronic funds transfer.
Operations of an entire division, subsidiary, or segment of a company where a formal plan exists to eliminate it from the company. (It involves more than pruning a product line of certain models of products.) The...
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of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
’ equity section of the balance sheet, the cash that was generated from those retained earnings is not likely be in the company’s checking account. Instead, the corporation likely used the cash to acquire additional...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
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