The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
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...
An employee’s pretax compensation based on hours worked times an hourly rate of pay. Production workers and nonmanagement employees are usually paid wages. To learn more, see Explanation of Payroll Accounting.
A corporation’s own stock that has been repurchased from stockholders. Also a stockholders’ equity account that usually reports the cost of the stock that has been repurchased.
This term refers to checking account balances. On a bank’s balance sheet, demand deposits are reported as current liabilities.
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
Past omitted dividends on cumulative preferred stock. Generally these omitted dividends were not declared and, therefore, do not appear on the corporation’s balance sheet as a liability. However, they must be...
A diagram depicting a company’s hierarchy or chain of command, its business segments, functions, and departments.
Asset, liability, and owner’s equity accounts. Also referred to as permanent or real accounts. To learn more, see Explanation of Balance Sheet.
In regression analysis this is a statistic (designated as r-squared) indicating the percentage of the change occurring in the dependent variable that is explained by the change in the independent variable(s). The percent...
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
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...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
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 check drawn on a bank. A cashier’s check leaves no doubt that the funds represented by the check are real. A bank money order or a certified check would also assure the payee that the funds are in the bank.
Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
A loan having the security of a lien on the borrower’s real estate.
A designation awarded by one of 50 U.S. states or five jurisdictions to a college graduate who has passed the rigorous Uniform CPA Exam and has met the required work experience. See Accounting Careers.
An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
Total liabilities divided by total assets. This indicates how much of a corporation’s assets are financed by lenders/creditors as opposed to purchased with owners’ or stockholders’ funds. If a high...
The withdrawal of business cash or other assets by the owner for the personal use of the owner. Withdrawals of cash by the owner are recorded with a debit to the owner’s drawing account and a credit to the cash...
This current liability account reports the amount a company owes the U.S. government as of the balance sheet date for the federal income taxes withheld from its employees’ salaries and wages.
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
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.
A graph’s vertical scale that usually indicates the total dollars for the volume or units indicated by the x-axis.
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 term associated with payroll deductions from an employee’s gross wages or gross salary.
The recording of a company’s transactions into the accounts contained in the general ledger. It is usually associated with the accounting tasks prior to the preparation of the trial balance. To learn more about...
A statistic known as the coefficient of determination. This statistic indicates the percent change in the dependent variable that is explained by the change in the independent variable(s).
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