A word used by accountants to communicate that an expense has occurred and needs to be recognized on the income statement even though no payment was made. The second part of the necessary entry will be a credit to a...
A word used by accountants to communicate that an expense has occurred and needs to be recognized on the income statement even though no payment was made. The second part of the necessary entry will be a credit to a...
A document that discloses important information on bonds or preferred stock. Included in the indenture would be the call price, the actions that can occur if the company fails to pay the interest or dividend, etc.
Relevant or meaningful data.
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
Often a liability representing the differences between the income tax expense associated with the revenues and expenses reported on a corporation’s income statements and the actual income tax appearing on the...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
Income based upon some assumptions.
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
The current asset that represents the amount of interest revenue that was reported as earned, but has not yet been received.
The situation where the number of units sold is not influenced by a change in selling price. In other words, a price increase does not have a corresponding decrease in the number of units sold.
The amount of rent that has been earned by the landlord or owner during the accounting period shown in the heading of the income statement, but it has not been received as of the last day of the accounting period.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
Financial statements issued between the official annual financial statements. For example, quarterly financial statements are interim financial statements.
Under accrual accounting it is the rent earned during the period indicated in the heading of the income statement, regardless of when the money is received from the tenant.
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
The multiplication of a quantity times its cost. For example, if 100 items are in inventory at a cost of $3.46 each, the inventory extension is $346.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
A current liability account which reflects the amount of income taxes currently due to the federal, state, and local governments.
An official pronouncement by the Financial Accounting Standards Board that involves a previously issued FASB Standard. FASB Interpretations are part of the generally accepted accounting principles.
No insurance. If a company chooses to self insure for fire damage, it does not have insurance for fire damage. Companies with a chain of stores in various cities may decide not to have insurance, since their risk is...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
The interest rate specified or stated in a note payable or in a bond payable. Often this rate is fixed and will not change during the life of the note or bond.
See goods in transit.
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
Goods or services provided instead of money.
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
The sales invoice or bill issued by a vendor and received by the buyer. The customer will also refer to the supplier invoice as the vendor invoice.
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
The interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.
An actual count of the goods owned by the business.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
Under the accrual basis of accounting, the Interest Revenues account reports the interest earned by a company during the time period indicated in the heading of the income statement. Interest Revenues account includes...
See inventory carrying costs.
Also referred to as manufacturing overhead, factory burden, factory overhead, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
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