The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
For example.
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
Another name for check.
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
See premium on bonds payable.
A subgroup of a nonprofit’s supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and...
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
A book of original entry that requires that both the account being debited and the account being credited be listed along with the respective amounts. Because of accounting software and special journals there are...
Revenue that has been earned but not yet invoiced to the customer.
The average time it takes for a retailer’s or manufacturer’s inventory to turn to cash. If a manufacturer turns its inventory six times per year (every two months) and allows customers to pay in 30 days, its...
This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
Goods sold by a retailer, wholesaler, distributor, manufacturer, etc.
The date on which the board of directors of a corporation declares a dividend on the corporation’s stock. On this date an accounting entry is made to debit Retained Earnings and to credit Dividends Payable.
Occurring twice per month. For example, if salaried personnel are paid on the 15th and the last day of the month, we would say they are paid semimonthly. People paid semimonthly will receive 24 paychecks during a year....
A word that means to add a column of numbers as in “Foot the amounts listed in column A.” Also see crossfoot.
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...
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
See production service department.
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
Amounts spent for property, plant and equipment.
A check that has been issued but has not yet been paid by the bank on which it is drawn. An uncleared check is also known as an outstanding check.
Journal entries usually dated the last day of the accounting period to bring the balance sheet and income statement up to date on the accrual basis of accounting. Adjusting entries are made to report (1) revenues that...
A department that is directly involved in manufacturing products. Examples are the machining, finishing, and assembling departments.
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
A structured market for trading stocks and bonds such as the New York Stock Exchange or NASDAQ. Capital market can also include less structured markets such as private placements.
What is the self-employed person's FICA tax rate for 2022 and 2023? 2022 FICA Tax Rate for Self-Employed The self-employed person’s FICA tax rate for 2022 (January 1 through December 31, 2022) is 15.3% on the first...
A bond (long-term debt) that is secured by a lien on real estate.
A decrease in the value of a long term asset to an amount that is less than the amount shown under the cost principle.
A liability account on the books of a company receiving cash in advance of delivering goods or services to the customer. The entry on the books of the company at the time the money is received in advance is a debit to...
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
See Internal Revenue Service (IRS).
See rolling budget.
The person paying rent for using but not owning the asset.
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
Journals other than the general journal. Special or specialized journals include the cash receipts journal, the cash disbursements journal, the purchases journal, and the sales journal.
The accounting or bookkeeping system that does not utilize computer software for entering transactions into journals and ledgers.
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