Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
This current liability account reports the amount a company owes as of the balance sheet date for its worker compensation insurance policy premiums. The amounts owed are usually based on the policy’s rates for the...
What is the debt to equity ratio? Definition of Debt to Equity Ratio The debt to equity ratio or debt-equity ratio is the result of dividing a corporation’s total liabilities by the total amount of stockholders’...
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
What are common-size financial statements? Common-size financial statements present the financial statement amounts as a percentage of a base number. For example, the common-size income statement will report the revenue...
Financial statements that show more than the current year’s amounts. For example, it is generally accepted that a corporation’s income statement will show the most recent three years of results. This provides...
That component of a product that has not yet been placed into the product or into work-in-process inventory. This account often contains the standard cost of the direct materials on hand. A manufacturer must disclose in...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its assets....
This account is a contra long-term asset account which is credited for the depreciation associated with land improvements. As an asset account, the accumulated depreciation account balance does not close at the end of...
See prepaid dues.
A term often used when referring to production workers and other workers who are paid with an hourly pay rate. These workers’ compensation is referred to as “wages” (as opposed to salaries).
A variance arising in a standard costing system that indicates the difference between the standard amount of fixed manufacturing overhead for the good units produced (standard hours times standard rate) and the budgeted...
What is historical cost? Definition of Historical Cost Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a transaction. The term historical...
See direct materials usage variance.
The amount that would be agreed upon by two independent persons. The amount to be received in the ordinary course of business in an arm’s length transaction.
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
The amount by which the proceeds from the sale of investments exceeded the carrying amount of the investments that were sold. It is reported as a non-operating or “other” item on a multiple-step income...
The paid-in (or contributed) capital account that is credited $100 for each share of $100 par preferred stock that is issued. If the proceeds from the issuance or sale of one of the shares is greater than $100, the...
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
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.
See current liabilities.
A liability account whose balance is the unpaid principal balance as of the balance sheet date. The amount of principal required to be paid within 12 months of the balance sheet date is reported as a current liability....
See direct labor efficiency variance.
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
sheet account that is reported under the heading of Property, Plant and Equipment. The asset’s cost (except for the cost of land) will then be allocated to depreciation expense over the useful life of the asset. The...
How do you calculate the actual or real interest rate on a bond investment? Definition of Actual or Real Interest Rate on a Bond Investment The actual or real interest rate on a bond payable is also known as effective...
An employee fringe benefit provided by an employer that allows employees to be absent from work with pay. Often the number of paid vacation days allowed is based on the number of years of employment.
See Explanation of Standard Costing.
The regular retained earnings. Retained earnings that have not been restricted.
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
Contributions collected by Charity #1 who is merely acting as a collection agent for Charity #2. Also known as flow-through contributions.
Under this method, net income is determined by analyzing the change in owner’s equity. The alternative is the transaction approach in which each transaction is recorded, sorted and stored.
A stockholders’ equity account with a credit balance. The credit balance results when a corporation sells some of its treasury stock for an amount that exceeds the corporation’s cost of the treasury stock...
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
See our Break-even Point Outline.
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