A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
See quality of earnings.
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
Another company that supplies goods or performs services. Also known as a vendor.
The operating activities of a company, excluding the major segments of the company that are being discontinued.
See contingent loss.
Obligations not reported as liabilities on the balance sheet.
See bank reconciliation.
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
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.
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
See sales.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
Federal Unemployment Tax Act. See federal unemployment tax.
See double declining balance method of depreciation.
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
Financial Statements Video Training Part 14 Statement of cash flows: free cash flow; statement of owner's equity Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current...
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. (Restricted cash should be recorded in a different account.)
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
A table showing present value factors for various interest rates and numbers of years/periods for a single amount at a future point in time.
Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
A department that is directly involved in manufacturing products. Examples are the machining, finishing, and assembling departments.
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
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.
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
See functional expense classification.
See not sufficient funds (NSF) check.
See net realizable value.
An invoice or other document received from a vendor, supplier, etc. usually for goods or services received. Also a verb to indicate that a customer’s sales invoice should be prepared for goods or services.
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
A lease where the lessee/tenant pays not only rent, but also the property taxes, insurance, and maintenance.
The amounts in a company’s bank account that are not yet accessible because the checks deposited into the account have not yet cleared the bank on which they were drawn.
A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...
Featured Review
"I currently hold the position of Environmental, Health, and Safety Specialist. I became a PRO user because while pursuing my degree in paralegal studies, I was required to take classes in accounting. My online class was completely self-taught, and I found myself struggling to understand the concepts as they were presented in the textbook. When I looked for online help, I found AccountingCoach. Becoming a PRO user allowed me to access lessons that made understanding my classes so much easier. I like that the lessons walk you through the concepts of accounting and are very clear to understand. They don't throw too much at you at one time; they make it easy for you to grasp one lesson before moving on to the next. Thanks to AccountingCoach, I was able to complete my accounting classes and graduate with my degree. Since then, I have become responsible for the finances of my team, and everything I have learned allows me to work with our finance department each quarter to review our books." - Chad B.
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: