Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
This current liability account reports the amount a company owes the state and federal governments as of the balance sheet date for the employer’s unemployment tax based on the governments’ rates and the...
A corporation’s total stockholders’ equity (excluding preferred stock) divided by the number of shares of common stock outstanding.
The cash flow from operating activities minus the amount of capital expenditures. Other variations are also used. To learn more, see Explanation of Cash Flow Statement.
See paid-in capital in excess of par value – common stock, or paid-in capital in excess of par value – preferred stock.
The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
The first major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
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.
This group preceded the current Financial Accounting Standards Board (FASB). The APB members served in a part-time capacity to determine the accounting standards from 1962 to 1973. The accounting rules established by the...
See job order cost sheet.
See net realizable value.
See common-size balance sheet and common-size income statement.
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
See sum of the years’ digits method of depreciation.
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not...
A highly summarized income statement
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
The “bottom line” on the statement of activities. The change in net assets results from revenues, expenses, and the release of assets from restrictions. It is computed for an organization’s three...
The accounting term that means an entry will be made on the left side of an account. To learn more about debits and credits, see our Debits and Credits Outline.
The amount an employee “clears” on her or his payroll check. It is also the “net” amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for...
A fee for the printing of checks ordered by a company. Often the amount is deducted automatically from a company’s checking account by the company that printed the checks.
A liability account that reflects the estimated amount a company owes for expenses that occurred, but have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
See units of production method of depreciation.
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
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