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 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...
See prepaid dues.
This account is a contra long-term asset account which is credited for the depreciation associated with land improvements. As an asset account, the accumulated depreciation account balance does not close at the end of...
A term often used when referring to production workers and other workers who are paid with an hourly pay rate. These workers’ compensation is referred to as “wages” (as opposed to salaries).
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 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...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
Financial statements that show more than the current year’s amounts. For example, it is generally accepted that a corporation’s income statement will show the most recent three years of results. This provides...
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...
What is the abbreviation for debit and credit? Abbreviation for Debit and Credit The abbreviation for debit is dr. and the abbreviation for credit is cr. Apparently the “dr.” is associated with the term used in Italy...
See our Break-even Point Outline.
The combined federal and state income tax rate that applies to an additional amount of taxable income.
Usually a simple form used by the petty cash custodian in order to document small payments from a petty cash box.
Financial Statements Video Training Part 3 Balance sheet: prepaid expenses; current assets; investments; property, plant and equipment Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
Long-term assets including property, plant, equipment and intangible assets. Buildings, furnishings, fixtures, office equipment, and vehicles are common examples of long-lived assets which are depreciated by nonprofit...
The exchange or trade-in of a long-term asset for a similar long-term asset. For example, trading the old delivery truck for a new delivery truck; trading a two-family rental unit toward an eight-family rental unit.
This is an administrative expense which reports the fees incurred by a company for the expenses associated with its checking account transactions.
A department within a factory that does not directly produce a product. Examples are the factory maintenance department, factory administrative department, and quality assurance department.
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
A business organization different from a sole proprietorship, partnership, and corporation. As the name implies it provides the limited liability protection usually associated with a corporation. To learn more about this...
That part of a manufacturer’s inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material,...
Also referred to as the current interest rate, the yield-to-maturity, and the effective interest rate. The market interest rate is always changing whereas the stated interest rate does not change.
See contractual interest rate.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
See direct materials usage variance.
See inventory: work-in-process (WIP).
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
A fee for the printing of checks ordered by a company. Often the amount is deducted automatically from a company’s checking account by the company that printed the checks.
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
A liability account that reflects the estimated amount a company owes for expenses that occurred, but have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting...
The situation where a company has assigned less manufacturing overhead than the amount actually incurred.
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
For a merchandiser this is the cost of merchandise purchased after deducting purchase returns, purchase allowances, and purchase discounts but after adding freight-in.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
What is a plant asset? What is a Plant Asset A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant assets are also known as fixed...
Retailers’ normal operating activities would include the purchase and sale of merchandise and selling and administrative expenses. A retailer’s investing of its idle cash is a nonoperating activity. However,...
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...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
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