What is an independent variable? In accounting, an independent variable is ideally a factor that causes a change in the total amount of the dependent variable. In other words, an independent variable should be something...
What is an independent variable? In accounting, an independent variable is ideally a factor that causes a change in the total amount of the dependent variable. In other words, an independent variable should be something...
The net amount of revenues and gains minus expenses and losses for the sole proprietorship owned by Matt Jones. After the financial statements are prepared for the year, this amount will be transferred to Matt Jones,...
A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.
Are estimates allowed in bookkeeping? While bookkeeping involves mostly precise amounts from sales and purchase invoices, cash receipts and checks written, etc. there are situations when estimates need to be entered....
What is an intangible asset? Definition of Intangible Asset An intangible asset is an asset that you cannot touch, since it lacks physical substance. Accountants record intangible assets at their cost when they are...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
A parody of FIFO used to describe a very slow-moving item in inventory.
What are interim financial statements? Definition of Interim Financial Statements Interim financial statements report amounts for time intervals that are shorter than a company’s annual financial statements. 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).
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...
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
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...
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...
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
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.
This current liability account reports the amount a company owes the U.S. government as of the balance sheet date for the federal income taxes withheld from its employees’ salaries and wages.
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,...
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...
What is an incremental cost? Definition of Incremental Cost An incremental cost is the difference in total costs as the result of a change in some activity. Incremental costs are also referred to as the differential...
What is self-insurance? Self-insurance means no insurance. For example, if a retailer decides to self-insure its buildings, the retailer will not have an insurance policy to pay for losses that may occur to its...
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 accounting term that means an entry will be made on the left side of an account. To learn more about debits and credits, see our Debits and Credits Outline.
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...
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 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...
Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
This current liability account reports the amount a company owes the state governments as of the balance sheet date for the state income taxes withheld from its employees’ salaries and wages.
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 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...
The accounting and reporting standards developed by the International Accounting Standards Board (IASB). IFRS are used by business entities in most countries. The most notable exception is the U.S. where business...
What is obsolete inventory? Definition of Obsolete Inventory Obsolete inventory refers to products that a company had purchased or produced which cannot be sold. The obsolete items may be the result of one or more of the...
What do negative variances indicate? Definition of Negative Variances on Accounting Reports Negative variances are the unfavorable differences between two amounts, such as: The amount by which actual revenues were less...
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...
What is an indirect cost? Definition of Indirect Cost An indirect cost is a cost that is not directly traceable to a cost object (product, department, etc.). Rather, the indirect cost is sometimes referred to as a common...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
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