This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
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.
Income Statement For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
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...
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
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.
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 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...
Financial statements issued between the official annual financial statements. For example, quarterly financial statements are interim financial statements.
Some examples of intangible assets include copyrights, patents, goodwill, trade names, trademarks, mail lists, etc. These assets will be reported at cost (or lower) on the balance sheet after property, plant and...
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
See perpetual system of inventory.
See contractual interest rate.
A document filed when a corporation is formed. Among other things, it lists the number of shares of stock that the corporation is authorized to issue.
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
Life insurance without a cash value.
Usually this refers to manufacturing employees who are not classified as direct labor. Material handlers, mechanics, setup workers, clean up workers are a few examples of indirect labor.
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
The ABC inventory system is different from activity-based costing. The ABC inventory system is used in order to focus on the most important items in inventory. Usually a relatively few items will account for a very...
The cost transferred from one department to the next department in a process costing system.
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
See perpetual system of inventory.
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...
Also referred to as manufacturing overhead, factory burden, factory overhead, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
The United States Internal Revenue Code which contains the federal laws and regulations pertaining to federal taxes.
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...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
This current liability account reports the amount of interest the company owes as of the date of the balance sheet. (Future interest is not recorded as a liability.)
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...
See direct materials inventory.
The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company’s bonds payable. Bond interest expense also includes the amortization of the...
That component of a product that has not yet been placed into the product or into work-in-process inventory. This account often contains the standard cost of the direct materials on hand. A manufacturer must disclose in...
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.
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