Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
A statistical tool that uses the least-squares method to estimate the fixed and variable components of mixed costs.
Long term assets that are not classified as investments, property, plant, equipment, or intangible assets. An example is bond issue costs that are amortized to expense over the life of the bonds.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
A symbol that represents 1000.
See carrying amount.
See cost-volume-profit (CVP).
The total of interest and principal payments required to be paid on loans payable.
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
The multiplication of a quantity times its cost. For example, if 100 items are in inventory at a cost of $3.46 each, the inventory extension is $346.
See Statement of Financial Accounting Standards.
What is equity? Definitions and Examples of Equity Equity has several definitions that pertain to accounting: Equity can indicate an ownership interest in a business, such as stockholders’ equity or owner’s equity....
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...
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...
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
A stakeholder is anyone that has an interest or is affected by a decision. For example, some of the stakeholders of a state university include the students, students’ families, alumni, professors, custodians,...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
The provider of goods or services. Also known as the vendor.
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...
A symbol that indicates the total amount of fixed costs during a specified period of time. In the equation of the straight line, y = a + bx, the total amount of fixed costs during the period is represented by...
What are the disclosures for a manufacturer's inventory? A manufacturer should disclose the following categories of inventory: raw materials, work-in-process, finished goods, manufacturing supplies, and packaging...
Which financial ratios are considered to be efficiency ratios? I consider the efficiency ratios to be the ratios also known as asset turnover ratios, activity ratios, or asset management ratios. These efficiency ratios...
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
The activities provided by a nonprofit in carrying out one of its major programs.
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
Management information system.
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...
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
The symbol that represents the total cost in the equation of the cost line y = a + bx.
An amount that should be charged to the current accounting period as an expense.
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
Point of sale.
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
The formal planning for significant expenditures, such as property, plant and equipment.
See job order costing.
See not sufficient funds (NSF) check.
See uncleared check.
A distribution of part of a corporation’s past profits to its stockholders. A dividend is not an expense on the corporation’s income statement.
Featured Review
"The AccountingCoach has helped me thru the years with all kinds of accounting questions. I have a Bachelor's degree in Accounting and my MBA. I have had various different accounting jobs and turn to AccountingCoach when I need a refresher or if I have a question. I recently took a job at a nonprofit organization and had no idea what I was getting into. AccountingCoach even has a section on that. You learn a lot in college but if you don't use what you've learned every day, AccountingCoach is a good resource to get yourself back up to speed." - Rhonda S.
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: