Past omitted dividends on cumulative preferred stock. Generally these omitted dividends were not declared and, therefore, do not appear on the corporation’s balance sheet as a liability. However, they must be...
Past omitted dividends on cumulative preferred stock. Generally these omitted dividends were not declared and, therefore, do not appear on the corporation’s balance sheet as a liability. However, they must be...
One of the steps in effective internal control. An example of separation of duties is to have the money handling be performed by someone who does not update the records. This means that the money counters at a church...
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
See old-age, survivor, and disability insurance (OASDI).
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
Verifiable, objective (not subjective), and you can depend on it.
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
Another company that supplies goods or performs services. Also known as a vendor.
A Latin term that means in proportion. See prorate.
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
The direct method could refer to the method of preparing the statement of cash flows. The direct method could also refer to the method of allocating a manufacturing facility’s service departments to its production...
A “clean” auditor’s report. That is, the auditor has concluded that the financial statements present fairly the results of the company’s operations and its financial position according to...
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
See deferred expense.
Sending work to another organization instead of processing the work in-house. Often payroll is outsourced to a company that specializes in payroll processing.
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
See production service department.
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
See first in, first out (FIFO).
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
See compound interest.
A lien on real estate to protect a lender. The loan made with such security is referred to as a mortgage loan.
The par value of common and preferred stock.
See bond sinking fund.
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
What is the difference between wages and salary? You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction… Definition of Wages Wages are...
but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense Credit Wages Payable or credit Accrued Wages Payable Wages...
Also referred to as manufacturing overhead, factory overhead, indirect manufacturing costs, or manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
Featured Review
"I have a small bookkeeping company. Being a PRO user on AccountingCoach has been transformative for my bookkeeping and accounting skills. The comprehensive lessons and interactive quizzes provide a structured learning experience, demystifying complex accounting concepts. The clear explanations, coupled with real-world examples, have significantly improved my proficiency in my business. The platform's intuitive interface enhances accessibility, allowing me to seamlessly navigate through various topics. The PRO features, including in-depth Q&A sessions and additional resources, ensure I stay ahead in my financial endeavors. AccountingCoach is an indispensable tool for anyone seeking a profound grasp of accounting principles, and its PRO membership is worth every penny for the enriched learning journey." - Jonathon P.
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: