Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
Billing a client based on the value of the information or service provided rather than billing based on time spent.
What is the days' sales in inventory ratio? Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to sell its inventory during a recent...
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
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...
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
The amount that a bank commits to lend a borrower during a specified purpose.
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
See goods in transit.
The record of checks issued or written, deposits, bank charges, bank credits and the resulting balance. Also referred to as the check register.
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
See cash surrender value.
To repurchase bonds that the company had previously issued.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
An individual owner of a business that is not incorporated.
The amounts withheld for employees’ checks for Social Security tax, Medicare tax, federal income tax, state income tax, and voluntary deductions such as United Way, union dues, 401(k) contributions,...
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
A budget that does not flex for changes in volume or activity.
A qualitative characteristic in accounting. It is achieved when information is verifiable, objective (not subjective) and you can depend on it.
A company might construct a building and then sell the building to an investor who in turn leases the building back to the company.
The type of stock that is present at every corporation. (Some corporations have preferred stock in addition to their common stock.) Shares of common stock provide evidence of ownership in a corporation. Holders of common...
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
Can I capitalize this year's R&D? Generally, R&D costs cannot be capitalized for U.S. financial statements according to the Statement of Financial Accounting Standards No. 2, Accounting for Research and Development...
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 cumulative amount of depletion expense pertaining to the natural resources shown on the balance sheet. The account has a credit balance and will be reported on the balance sheet as a contra asset.
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
See credit memo.
See debenture bond.
A bond that is callable by the issuer at a certain price. The price and other conditions are disclosed in the bond’s indenture.
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
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