Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
An effort to have materials delivered by suppliers just as the materials are needed, thereby eliminating the need for the buyer to store inventories of component parts. Obviously, the buyer is relying on the...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
The rate that will discount all cash flows to a net present value of zero.
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
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...
The system where the general ledger account Inventory is not updated during the year. Rather, the merchandise purchased is recorded in temporary purchases accounts. At the time a balance sheet is presented, the inventory...
The “bottom line” on the statement of activities. The change in net assets results from revenues, expenses, and the release of assets from restrictions. It is computed for an organization’s three...
The U.S. government agency responsible for federal income tax regulations.
The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
This is a long term asset account that accumulates the cost of a project that has not yet been placed into service. When the project is finished and placed into the service, the cost is removed from this account and is...
, to decrease the debit balance in a receivable account you will need to credit the account. 6. What type of accounts are Deferred Revenues and Unearned Revenues? Asset Wrong. Liability Right! Accounts such as Deferred...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
of accounting, if a company does not defer a customer’s $15,000 deposit for work to be done in the following accounting year, which of the following will be incorrect on the company’s current period’s financial...
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 income statement? Definition of Income Statement The income statement is also known as the statement of operations, profit and loss statement, and statement of earnings. It is one of a company’s main...
What is income smoothing? Definition of Income Smoothing Income smoothing involves reducing the fluctuations in a corporation’s earnings. The reductions in fluctuations can result from some legitimate business methods...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
What is interest expense? Definition of Interest Expense Interest expense is the cost of borrowing money during a specified period of time. Interest expense is occurring daily, but the interest is likely to be paid...
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
A method for estimating the inventory of a retailer. This method requires that the retail amounts and the related cost amounts are available for beginning inventory and purchases. An illustration of this technique is...
A parody of FIFO used to describe a very slow-moving item in inventory.
What is interest payable? Definition of Interest Payable Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. [Interest payable...
What is carriage inwards? Definition of Carriage Inwards Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered with terms FOB shipping point....
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
See Explanation of Inventory and Cost of Goods Sold.
A corporation’s net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).
See exchange of similar nonmonetary assets.
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
What is accrued income? Definition of Accrued Income Accrued income is an amount that: A company has earned The company has a right to receive The collection is probable Has not yet been recorded in the general ledger...
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...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
Featured Review
"I am thankful I signed up for AccountingCoach. My background is in front-office customer service and minor bookkeeping. My husband and I opened a satellite office for a European company where I had to use all those skills and more. We have an ERP system and an accountant, but I needed to brush up on some of my bookkeeping and learn new skills to keep up with my accountant. I have recently started with AccountingCoach, and I can tell you that it is user friendly and easy to navigate. You can go in order or jump to a section as needed. Everything is clearly explained. The PRO platform is great because you have access to all the material whenever you need it, so if I have any future questions, I can go back and look at it. I would highly recommend this website to others." - Susan H.
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: