A lease that “in substance” is a purchase and financing arrangement. When a lease meets certain criteria, the asset being “rented” is recorded as an asset and a liability is also recorded. A lease...
A lease that “in substance” is a purchase and financing arrangement. When a lease meets certain criteria, the asset being “rented” is recorded as an asset and a liability is also recorded. A lease...
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
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...
A formal written promise to pay interest every six months and the principal amount at maturity.
The amount in a bank account according to the bank’s records.
The recording of a company’s transactions into the accounts contained in the general ledger. It is usually associated with the accounting tasks prior to the preparation of the trial balance. To learn more about...
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
See weighted-average cost flow assumption and moving-average cost of inventory.
An asset which serves as collateral for a loan.
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...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
The cost of the next unit.
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
Benefits given to employees that are in addition to wages and salaries. Examples include health, dental, life, vision, and disability insurances, employer’s portion of social security and Medicare tax, paid...
See deferral-type adjusting entry.
This current liability account reports the ”net” amount a company owes its employees as of the date of the balance sheet. The ”net” amount is the amount of the employees’...
See direct materials usage variance.
See double declining balance method of depreciation.
A sorting of a company’s accounts receivables by the age of the receivables.
What is the rationale for not reporting plant assets at their liquidation value? I will assume that the plant assets‘ liquidation values are higher than the present carrying values when answering your question. Plant...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Actions taken or not taken prior to issuing financial statements in order to improve the amounts appearing in the financial statements.
A term often used when referring to office workers, managers, professionals, and executives. These employees’ pay is often stated as a salary for a month (and not as an hourly pay rate).
The formal planning for significant expenditures, such as property, plant and equipment.
See stockholders’ equity.
Financial Statements Video Training Part 13 Statement of cash flows: cash flows from operating activities, cash flows from investing activities, cash flows from financing activities, quality of earnings Must-Watch Video...
A term used in break-even analysis to indicate the amount of sales that are above the break-even point. In other words, the margin of safety is the amount by which a company’s sales could decrease before the...
The accounting or bookkeeping system that does not utilize computer software for entering transactions into journals and ledgers.
The amount by which the proceeds from the sale of land exceeded the carrying amount of the land sold. It is reported as a non-operating or “other” item on a multiple-step income statement.
delivery van, this transaction is outside of the retailer’s main business activities of purchasing and selling merchandise. Therefore, the sale of the van will not be included with the sales of merchandise. Instead, a...
See straight-line method of depreciation.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
Someone who has granted credit. If a bank lends a company money, the bank is a creditor. If a supplier sold merchandise to a company on credit, the supplier is a creditor.
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
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...
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