What is the employer matching of FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act, which requires employers to withhold the following from each employee’s paycheck: Social Security...
What is the employer matching of FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act, which requires employers to withhold the following from each employee’s paycheck: Social Security...
What causes a reduction in Accumulated Depreciation? Definition of Accumulated Depreciation Accumulated Depreciation is a general ledger contra asset account associated with a company’s property, plant and equipment....
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
How does revenue affect the balance sheet? Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts receivable) and an increase in the...
What is an account payable? Definition of an Account Payable An account payable is an amount owed to a supplier or vendor for goods or services that were provided in advance of payment. However, some people use the term...
What is relevant range? Definition of Relevant Range In accounting, the term relevant range usually refers to a normal range of volume or normal amount of activity in which the total amount of a company’s fixed costs...
Reconciling the Bank Statement When preparing a bank reconciliation, you may find the following tip to be helpful: “Put it where it ain’t.” My now deceased neighbor (Herb) insisted that I share this tip, which he...
Why are sales a credit? Definition of Sales In accounting, sales are revenues earned when a company transfers ownership of its goods to its customers. Under the accrual basis or method of accounting, the sale occurs when...
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 depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
What is retained earnings? Definition of Retained Earnings Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of dividends that were declared. Retained...
What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
What if an employee's actual vacation payment is greater than the amount that has been accrued? Let’s assume that a company’s accounting year ends on December 31 and the company has only one employee who worked the...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
Why is the accuracy of inventory valuation so important? Definition of Inventory Accuracy Inventory accuracy means the following: Accurate counts of the items in inventory Proper cost of each item in inventory (based on...
Why does a company's profit appear as a credit on its balance sheet? The accounting equation and the double entry system provide an explanation why a company’s profit appears as a credit on its balance sheet. Asset...
What is a product cost? Definition of a Retailer’s Product Cost In accounting, a retailer’s product cost is the cost paid to a supplier plus any other costs that are necessary to get the product in place and ready...
What does crossfoot mean? Definition of Crossfoot or Crossfooting Accountants and auditors use the word foot to mean adding one or more columns of numbers. When there are several columns of numbers along with a...
Accounts Payable (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (29) Marked Wrong (0) Marked Right (0) accounts payable This current liability reports the amounts a company owes its vendors...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Financial Statements (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (30) Marked Wrong (0) Marked Right (0) financial statements These are part of the accounting cycle and part of a...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
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...
Why and how do you adjust the inventory account in the periodic method? Definition of Inventory Account in Periodic Method Under the periodic method or periodic system, the account Inventory is dormant throughout the...
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
The amount of owner’s equity or stockholders’ equity reported on a company’s balance sheet. This is not an indication of the company’s fair market value.
The contra owner’s equity account used to record the current year’s withdrawals of business assets by the sole proprietor for personal use. This is a temporary account with a debit balance. It will be closed...
A document issued to a customer by a seller which reduces the seller’s accounts receivable and its net sales. It also reduces the buyer’s accounts payable and net purchases. A document issued by a bank that...
A written opinion of an independent certified public accountant that a company’s financial statements are a fair representation of the company’s financial performance and financial position. The...
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
What is inventory change and how is it measured? Definition of Inventory Change Inventory change is the difference between the amount of last period’s ending inventory and the amount of the current period’s ending...
What is the accounts receivable turnover ratio? Definition of Accounts Receivable Turnover Ratio The accounts receivable turnover ratio (or receivables turnover ratio) is an important financial ratio that indicates a...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Accounts Payable Accounts Payable Accounts payable are sometimes referred to as trade payables. Accounts payable involve the amounts that a company owes to vendors and others who have supplied goods or services on...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
A company’s receipts that appear on the company’s records but do not yet appear on the bank statement. For example, a retail store’s receipts of March 31 are deposited after banking hours on March 31 or...
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