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...
The issued shares of common stock minus the shares of treasury stock. The weighted average of the outstanding shares is used to compute the earnings per share.
See current ratio.
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The amount of rent that has been earned by the landlord or owner during the accounting period shown in the heading of the income statement, but it has not been received as of the last day of the accounting period.
Within a reasonable range of activity, the slope of the cost line is the variable rate, which is often denoted as ‘b’ in the straight line y = a + bx.
Retained earnings not available for dividends.
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
What is meant by nonoperating expenses and losses? Definition of Nonoperating Expenses and Losses Nonoperating expenses are business expenses that are outside of a company’s main or central operations. (Some describe...
See direct materials usage variance.
Preferred stock that can be exchanged by the holder for a specified number of shares of common stock of the same company.
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.
A tax status allowed by the U.S. Internal Revenue Service.
Future cash amounts that have not been discounted to their present value.
The cash amounts received after deducting the related income taxes and also the cash amounts paid after deducting the cash saved when the amounts are income tax deductible.
Financial Statements Video Training Part 10 Income statement: formats (multiple-step, single-step, comparative, amounts as % of net sales) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
The regular retained earnings. Retained earnings that have not been restricted.
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
See inventory carrying costs.
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,...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
Financial statements that reflect the total economic entity. For example, on a consolidated income statement a corporation having several subsidiaries would report the total of all of its companies’ sales that were...
What are the journal entries for a stock split? Definition of a Stock Split A stock split usually increases the number of shares of a corporation’s common stock with the intention of reducing the market price of each...
Current assets minus current liabilities. Also see working capital.
See yield to maturity.
Financial Statements Video Training Part 9 Income statement: revenues, cost of goods sold, expenses, nonoperating items Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
A company’s income statement which reports each item as a percentage of net sales.
The United States Internal Revenue Code which contains the federal laws and regulations pertaining to federal taxes.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
A balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
Sorting and reporting expenses by the nature of the expense such as salaries, wages, rent, utilities, supplies, depreciation, advertising, and so on.
The cost of repairing or replacing previously sold products during their warranty periods.
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
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...
Analyzing financial statements by using financial ratios, horizontal analysis, and vertical analysis. To learn more, see Explanation of Financial Ratios.
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
Featured Review
"I appreciate AccountingCoach so much! The information on the site has helped me immeasurably in my financial accounting course. It simplifies the various concepts in a way that allows me to truly understand them. I was struggling in the course for the first few weeks, but now I have a much better grasp of the material -- and it shows in my homework, quiz, and exam scores. Thank you!" - Tamra M.
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: