certificate for merchandise or services. Accounting for the Sale of Gift Certificates The sale of a gift certificate should be recorded with a debit to Cash and a credit to a liability account such as Gift Certificates...
certificate for merchandise or services. Accounting for the Sale of Gift Certificates The sale of a gift certificate should be recorded with a debit to Cash and a credit to a liability account such as Gift Certificates...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
A financial statement that reports the current year information contained in the general ledger account Retained Earnings. The statement will include the beginning balance, prior period adjustments, net income for the...
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.
That part of a manufacturer’s inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material,...
The amount an employee “clears” on her or his payroll check. It is also the “net” amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for...
See net realizable value.
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
A corporation with a limited number of stockholders and whose stock is usually not publicly traded.
This current liability account reports the amount a company owes the United Way organization as of the balance sheet date. The amount includes the withholdings from employees’ pay plus the amount owed by the...
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
See first in, first out (FIFO).
The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
This preferred stock feature assures the owner that any omitted dividends on this stock will be made up before the common stockholders will receive a dividend. Any omitted dividends on cumulative preferred stock are...
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
Allowing a person or company to purchase goods or services without paying cash at the time of purchase.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
The first section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the warehouse employees have earned during the accounting period indicated in the heading of the...
A management tool that identifies the critical path—the path of sequential activities requiring the longest time to complete.
Sorting and reporting expenses according to the type of activity for which the expense was incurred. The functional expense classifications for a nonprofit organization would be Program #1, Program #2, Management and...
Stock without a par value.
A liability account with a credit balance associated with bonds payable that were issued at more than the face value or maturity value of the bonds. The premium on bonds payable is amortized to interest expense over the...
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...
Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.
The variable manufacturing costs other than direct materials and direct labor that have been assigned to the products manufactured via a predetermined rate. Ideally, by the end of the accounting year the amount applied...
A company’s balance sheet that shows each item’s amount after it has been divided by the amount of total assets. In other words, current assets will be shown as a percentage of total assets. This will allow...
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...
The issued shares of common stock minus the shares of treasury stock. The weighted average of the outstanding shares is used to compute the earnings per share.
A budget that continuously shows the amounts for a full year into the future. As a month or quarter actually occurs, it is removed from the budget and is replaced by the budgeted amounts for a month or quarter in the...
A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must...
A restricted asset for the purpose of retiring a bond.
Federal government securities sold at a discount (because of no interest payments) with maturity dates of less than one year.
To learn more, see our Nonmanufacturing Overhead Outline.
See sum of the years’ digits method of depreciation.
A business organization different from a sole proprietorship, partnership, and corporation. As the name implies it provides the limited liability protection usually associated with a corporation. To learn more about this...
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