What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
Is Accounts Payable a debit or a credit or both? Definition of an Accounts Payable Credit Since Accounts Payable is a liability account, it should have a credit balance. The credit balance indicates the amount that a...
What is the self-employed person's FICA tax rate for 2022 and 2023? 2022 FICA Tax Rate for Self-Employed The self-employed person’s FICA tax rate for 2022 (January 1 through December 31, 2022) is 15.3% on the first...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
What does the term organic growth mean? Organic growth often refers to the growth in a company’s sales that did not occur because of an acquisition of another company. Expressed another way, organic growth is...
What are sales discounts? Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. Sales discounts...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
What is the consistency principle? Definition of Consistency In accounting, consistency requires that a company’s financial statements follow the same accounting principles, methods, practices and procedures from one...
What is goodwill? Definition of Goodwill In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase...
What is an account? Definition of Account In accounting, an account is a record in the general ledger that is used to sort and store transactions. For example, companies will have a Cash account in which to record every...
When are expenses credited? Definition of Expenses Credited Normally, the general ledger accounts for expenses are debited and are expected to have debit balances. The reason they are debited is they cause the normal...
Why is an increase in inventory shown as a negative amount in the statement of cash flows? Meaning of a Negative Amount on Statement of Cash Flows A negative amount on the statement of cash flows (SCF) indicates that the...
What is the book value per share of stock? Definition of Book Value per Share of Stock The book value of a corporation is the amount of its stockholders’ equity. Assuming the corporation does not have preferred stock...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
What is a line of credit? In business a line of credit or credit line is an arrangement/commitment by a bank or other creditor with a customer. The agreement specifies an amount that the customer can borrow or use in the...
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
What is the debt to total assets ratio? Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you the percentage of a company’s total...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
Where do dividends appear on the financial statements? Definition of Dividends Cash dividends are a distribution of a company’s profits. Financial Statements of a Corporation The main financial statements of a...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed to...
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee is not...
Is an entry made for outstanding checks when preparing a bank reconciliation? Definition of Outstanding Checks Outstanding checks are checks written by the company, recorded in the company accounts, but not yet appearing...
What are invoice payment terms? Definition of Invoice Payment Terms Invoice payment terms appear as part of the information shown on the invoice (or bill) prepared by a seller of goods or a provider of services....
What is the difference between biweekly and semimonthly payroll? Definition of Biweekly Payroll Biweekly payroll refers to paydays that occur 26 times per year (52 weeks in a year divided by 2 weeks = 26 times per year)....
What is the difference between stockholder and stakeholder? Definition of Stockholder A stockholder or shareholder is the owner of shares of a corporation’s common or preferred stock. Definition of Stakeholder A...
What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
What is the entry for the down payment from a signed contract? Definition of Down Payment on a Contract A down payment on a signed contract means a company has received money in advance of doing the work specified in the...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
Are retained earnings an asset? Definition of Retained Earnings Usually, retained earnings consists of a corporation’s earnings since the corporation was formed minus the amount that was distributed to the stockholders...
When should a product warranty liability be recorded? Definition of Product Warranty Liability A product warranty means the manufacturer or seller has a potential liability and expense if its product or service fails to...
What are reversing entries and why are they used? Definition of Reversing Entries Reversing entries are made on the first day of an accounting period to remove accrual adjusting entries that were made at the end of the...
What is the difference between the current ratio and the acid test ratio? The difference between the current ratio and the acid test ratio (or quick ratio) mainly involves the current assets inventory and prepaid...
Are undeposited checks reported as cash? Undeposited checks that are not postdated (not dated with a future date) are reported as cash. Accountants define cash as more than just currency and coins. For example,...
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