See income statement. To learn more, see Explanation of Income Statement.
See income statement. To learn more, see Explanation of Income Statement.
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 tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
A decentralized division of a corporation which is responsible for and has control over its costs, revenues, and investments.
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...
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
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...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
Also referred to as manufacturing overhead, factory burden, factory overhead, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
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.
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...
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.
Financial statements issued between the official annual financial statements. For example, quarterly financial statements are interim financial statements.
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
See Explanation of Inventory and Cost of Goods Sold.
See inventory carrying costs.
Income or revenue earned by a company that is outside of its main operating activities. For a retailer the interest earned on its temporary investments is a nonoperating revenue (or nonoperating income).
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).
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...
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...
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...
See goods in transit.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
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 interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.
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.
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.
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.)
A financial ratio that compares a company’s interest expense to the company’s income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the...
A company’s receipts that appear on the company’s records but do not yet appear on the bank statement. For example, a retail store’s receipts of March 31 are deposited after banking hours on March 31 or...
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
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.
A document that discloses various conditions and terms of the company’s bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
Inventory that is less than the expected amount. It might be associated with theft or damage.
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
An actual count of the goods owned by the business.
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...
Featured Review
"AccountingCoach is the real deal. I am a new accounting student and found myself very overwhelmed and confused at the start of the Spring semester this past January. I was extremely frustrated and contemplating changing my major (again-- I'd just switched to accounting from Paralegal). I cannot remember how I came across AccountingCoach, but I am so grateful that I did. Any time I feel that I am not getting something, I come to AccountingCoach for easy-to-understand explanations. I was able to pass all of my classes that semester, and I was able to earn a 4.0 this semester because I made straight A's. Thank you, thank you, thank you for this!!!" - Sonya
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: