Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
An employee’s pretax compensation based on hours worked times an hourly rate of pay. Production workers and nonmanagement employees are usually paid wages. To learn more, see Explanation of Payroll Accounting.
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...
A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
Segments of a business. For example, a corporation may have a consumer division and an industrial division in order to improve its effectiveness in marketing its goods.
A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
An unsecured bond. For example, a bond not secured by a lien on the issuer’s property.
See first-in, still here (FISH).
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...
The acronym for cost of goods sold.
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
A company’s loss before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
Used in conjunction with cost or expense behavior. Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s...
What is the difference between gains and proceeds in terms of long-term assets? Definition of Long-term Assets Long-term assets, which are also referred to as noncurrent assets, are assets that generally are not expected...
The date that determines which stockholders are entitled to receive a corporation’s declared dividend. No accounting entry is made on this date.
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
See absorption costing.
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
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.
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as “take home pay” or the amount the employee...
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...
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...
A lease that “in substance” is a purchase and financing arrangement. When a lease meets certain criteria, the asset being “rented” is recorded as an asset and a liability is also recorded. A lease...
See Public Company Accounting Oversight Board (PCAOB).
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
Also referred to as a sunk cost. A past cost is not relevant to a decision.
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 corporation’s own stock that has been repurchased from stockholders. Also a stockholders’ equity account that usually reports the cost of the stock that has been repurchased.
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
See certified public accountant.
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
See Securities and Exchange Commission.
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
A symbol that represents 1000.
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
See mixed expenses.
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