In payroll processing, the withholding of money from an employee’s wages or salary as ordered by a court. The money is then remitted by the employer to the agency specified by the court. To learn more, see...
In payroll processing, the withholding of money from an employee’s wages or salary as ordered by a court. The money is then remitted by the employer to the agency specified by the court. To learn more, see...
A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.
An amount that should be charged to the current accounting period as an expense.
Using the information generated in activity-based costing to plan and control activities and processes.
The direct method could refer to the method of preparing the statement of cash flows. The direct method could also refer to the method of allocating a manufacturing facility’s service departments to its production...
The general guidelines and principles, standards and detailed rules, plus industry practices that exist for financial reporting. Often referred to by its acronymn GAAP. To learn more, see Explanation of Accounting...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
To learn more, see Explanation of Depreciation.
A phrase used to communicate the total compensation of a salaried employee. Fringe benefits (health insurance, vacation days, sick days, employer matching of Social Security and Medicare taxes, pension or 401-k...
A shortened version of the term bank reconciliation or bank statement reconciliation.
What is workers' compensation insurance? Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for its employees’ work-related injuries...
Multiplying the individual items contained in each bill of material times the number of units expected to be produced during a specified time period. The result is the total quantity of each input that will be needed for...
Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
The symbol that represents the total cost in the equation of the cost line y = a + bx.
Part of a company’s administration that is responsible for preparing the financial statements, maintaining the general ledger, paying bills, billing customers, payroll, cost accounting, financial analysis, and...
In accounting and bookkeeping this term is used to describe paying a vendor more than once for the amount owed.
See chief executive officer.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
What is the expanded accounting equation? Definition of Expanded Accounting Equation The expanded accounting equation provides more details for the owner’s equity amount shown in the basic accounting equation. The...
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that...
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
See Securities and Exchange Commission.
These pronouncements were issued by the Committee on Accounting Procedures of the American Institute of Certified Public Accountants during the years 1953 to 1959. They were and are part of the generally accepted...
This is the classification shown on a single-step income statement which reports the operating revenues, nonoperating revenues, and gains in one section of the income statement. Revenues and gains enhance the...
The allocation to expense of the cost of an intangible asset such as a patent or goodwill.
What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
For example.
A method for estimating the inventory of a retailer. This method requires that the retail amounts and the related cost amounts are available for beginning inventory and purchases. An illustration of this technique is...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
See accrued payroll.
Manufacturing costs other than direct materials and direct labor. To learn more about manufacturing overhead, see our Manufacturing Overhead Outline.
A table of factors that shows what the future value of $1 will grow to if invested at the rate shown in the column heading and compounded for the number of periods indicated in the row.
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
A projection or estimate of the future quantities and selling prices of products and/or services.
A legal entity organized under state laws that is considered separate from its owners. Ownership is evidenced by shares of stock.
The exchange or trade-in of a long-term asset for a similar long-term asset. For example, trading the old delivery truck for a new delivery truck; trading a two-family rental unit toward an eight-family rental unit.
Usually used in describing fixed costs. We often state that fixed costs will not change as volume changes. However, if volume were to triple, there would likely be more fixed costs as the company will need more space and...
Featured Review
"I became a PRO user back when I was an accounting student pursuing my bachelor's degree. Accounting is like a whole different language, so I found it difficult to learn in the beginning. As someone who did not have prior accounting knowledge in high school, it would take me a while before I would understand the topics. Then I found AccountingCoach, and it helped me tremendously in really grasping the concepts at my own pace. I also utilized the exams as practice for my actual exams. I found that the most effective way to test one's knowledge is to try it on their own, and the materials on AccountingCoach allowed me to do just that. I graduated Summa Cum Laude and am now an accountant at a local public accounting firm. I am really thankful for the resources provided by AccountingCoach when I was still a student, and I am looking forward to maximizing the benefits with PRO Plus now as a professional!" - Katrina T.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: