See straight-line method of depreciation.
See straight-line method of depreciation.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
The net amount of gross sales on credit minus the sales returns, sales allowances, and sales discounts which pertain to the sales on credit.
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
Usually referred to as the SEC. The U.S. government agency which has regulatory power over the U.S. stock exchanges and the reporting requirements of the corporations whose stock is traded on those stock exchanges. The...
The discounted value of a series of equal amounts occurring at the end of each equal time interval. To learn more, see our Present Value of an Ordinary Annuity Outline.
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.
A parody of FIFO used to describe a very slow-moving item in inventory.
This term is often associated with an investment in the common stock (and/or preferred stock) of a corporation when the stock is publicly traded.
What are gains? Definition of Gains In financial accounting, gains often pertain to some of a company’s transactions which occur outside of the company’s main business activities. Transactions which are outside of a...
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
The description of the required reporting of expenses by some nonprofits. The expenses will be presented on lines based on the nature of the expense (salaries, fringe benefits, rent, utilities, postage, professional...
Generally, securities that can be sold quickly in the stock or bond market and where the investor’s intention is to sell them within one year of the balance sheet date.
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
See Explanation of Standard Costing.
See prepaid dues.
Obligations of the enterprise that are not payable within one year of the balance sheet date. Two examples are bonds payable and long term notes payable.
See contractual interest rate.
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
This term is often associated with an investment in the bonds issued by another corporation if the bonds are traded on a bond exchange.
The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
See vacation pay payable.
The issued shares of common stock minus the shares of treasury stock. The weighted average of the outstanding shares is used to compute the earnings per share.
What is the purpose of the cash flow statement? Definition of Cash Flow Statement The cash flow statement or statement of cash flows or SCF identifies a company’s major cash inflows and outflows that occurred the same...
A tax imposed on income earned by a nonprofit that is unrelated to its exempt purpose.
Usually an annual manufacturing overhead rate established just prior to an accounting year and based on budgeted amounts.
This financial statistic is the net income of a corporation after income tax (less any preferred dividends) divided by the weighted average number of shares of common stock outstanding during the same period of time.
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
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...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
Preferred stock that is callable by the issuer at a certain price. The price and other conditions are disclosed in the preferred stock’s indenture.
What are the journal entries for a stock split? Definition of a Stock Split A stock split usually increases the number of shares of a corporation’s common stock with the intention of reducing the market price of each...
The net amount of revenues and gains minus expenses and losses for the current year for the sole proprietorship owned by R. Smith. After the financial statements are prepared for the year, this amount will be transferred...
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
The United States Internal Revenue Code which contains the federal laws and regulations pertaining to federal taxes.
See discounted cash flow model.
Featured Review
"Earlier this year, I began my own bookkeeping business in Indiana to help small local service businesses with their books. As I was preparing for that transition, I started looking for some basic accounting training as my degree in college was in music education. Someone recommended your website to me, and I loved it! I became a PRO user after I had been using the free version of your website for a while. I felt that having access to the additional materials (tests, quizzes, etc.) would help me synthesize and understand the information on a deeper level than simply reading about it. And it absolutely did. I liked the various ways that the website offers to engage with the information. Not only is it more interesting, but it truly aids in learning. As a trained educator, I greatly appreciated the incorporation of various learning implements to deepen understanding. I believe I have developed a much stronger understanding of accounting basics since using AccountingCoach. Obviously I'm not a CPA, but I have a good grasp on the fundamentals and the terminology involved. Thank you so much for this website—I appreciate feeling like my money is well spent, and upgrading to PRO was absolutely worth it." - Kate B.
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: