basis, such as $50,000 per year. Many employees working in a company’s general office will be paid a salary. Often the salaries are paid semi-monthly. That is, one pay date will be the 15th day of the month for...
basis, such as $50,000 per year. Many employees working in a company’s general office will be paid a salary. Often the salaries are paid semi-monthly. That is, one pay date will be the 15th day of the month for...
but inadequate for other companies. Difference Between Net Working Capital and Liquidity Net working capital is often cited as one of the indicators of a company’s liquidity. However, the amount of net working capital...
What is a bookkeeper? Definition of Bookkeeper A bookkeeper is usually employed by a small to mid-size company (or other organization) to process and record the large volume of transactions involving sales, purchases,...
capital expenditure projects are required and may not increase a company’s profits…think OSHA or environmental mandates Some of projects will provide cost savings through faster operations or reductions in manual...
, the Cash account (not the Petty Cash account) will be credited. The debits will go to the expense accounts indicated by the petty cash receipts, such as postage expense, supplies expense. In other words, the general...
’ managements. In the U.S., some companies have annual accounting periods that end on dates other than December 31. For example, a company could have a fiscal year of July 1 through the following June 30. Its quarterly...
to the goods produced in that month Examples of Normal Costing and Actual Costing Assume that a manufacturer experiences an additional $200,000 in manufacturing overhead costs (air conditioning and other) in each of the...
that should have been used to make the good output. In other words, the actual quantity of materials used to make the good output was different from the standard quantity of materials that should have been used. The...
for the product. The repair bill was the same $400. In this situation you will not be foregoing any sales or losing any customers. Therefore the profit foregone is $0. In other words, there is no opportunity cost of the...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
See common-size balance sheet and common-size income statement.
An allocation based on some proportions. For example, a corporation’s taxable income that was earned in many of the U.S. states might be allocated or apportioned to the states in which the corporation has conducted...
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
See accrued rent expense. Also see accrued rent income.
An income statement account at a financial institution used to record and report the amounts earned from fees charged to customers.
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
Under the accrual basis of accounting, this account reports the cost of the temporary help services that a company used during the period indicated on its income statement.
That part of the accounting system which contains the balance sheet and income statement accounts used for recording transactions.
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
Financial statements (such as the income statement and balance sheet) that summarize much of the detail into a few major lines of information.
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
An income statement account for expense items that are too insignificant to have their own separate general ledger accounts.
A corporation’s reported net income and earnings per share for a three-month period.
A selling expense account shown on the income statement in order to match this expense to the related sales.
The amount of rent that has been incurred by a tenant during an accounting period shown in the heading of the income statement, but it has not been paid as of the last day of the accounting period.
A word used by accountants to communicate that an expense has occurred and needs to be recognized on the income statement even though no payment was made. The second part of the necessary entry will be a credit to a...
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
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...
The expensing of an intangible asset from the balance sheet to the income statement.
The U.S. government agency responsible for federal income tax regulations.
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