out. Definition of the Accrual Basis of Accounting The accrual basis of accounting provides a better picture of a company’s profits during an accounting period for the following reasons: Revenues are reported on the...
out. Definition of the Accrual Basis of Accounting The accrual basis of accounting provides a better picture of a company’s profits during an accounting period for the following reasons: Revenues are reported on the...
What is recorded in the Wages and Salaries Expense account? Definition of Wages and Salaries Expense The account Wages and Salaries Expense (or separate accounts such as Wages Expense or Salaries Expense) are used to...
of Adjusting Entries Adjusting entries that will result in a difference between the unadjusted trial balance and the adjusted trial balance include the following: The accrual of expenses that were incurred but were not...
statements) at the time that an order is received: The company has not yet earned the revenue The company does not yet have a right to a receivable or other asset The revenues and a receivable will not be earned until...
Where should I enter unpaid wages? Definition of Unpaid Wages Unpaid wages are usually the amounts that hourly-paid employees have earned, but have not yet been paid to the employees. Entering Unpaid Wages Under the...
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 bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
as Insurance Expense for the accounting year ending on December 31 is $__________. Use the following information for answering Questions 13 - 18: On December 21, a company borrowed $100,000 from its bank. The loan has...
value of money or future interest which is contained (is implicit) within the future cash amounts. Accountants record the present value of a future amount when the cash amount, cash equivalent amount, or fair market...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
on the statement of cash flows.) The interest on the loan will be reported as expense on the income statement in the periods when the interest is incurred. Example of a Loan Principal Payment Let’s assume that a...
tax to each month when revenues are earned as a result of the property. Monetary Unit Wrong. In the U.S. the monetary unit is associated with the reporting of all items in U. S. dollars and that the U. S. dollar's...
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is...
The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
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 company’s loss 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.
In financial accounting this term refers to the amount of debt excluding interest. Payments on mortgage loans usually require monthly payments of principal and interest.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
Market interest rate, current return, effective interest rate. Also see yield to maturity.
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
by management 2. Which method or basis of accounting best measures the net income earned by a company during a short period of time? Select... Accrual Cash 3. Which of the following would you expect in the heading of a...
An income statement account at a financial institution used to record and report the amounts earned from fees charged to customers.
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
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.
Under accrual accounting it is the rent earned during the period indicated in the heading of the income statement, regardless of when the money is received from the tenant.
The compensation earned by employees who are paid on an hourly basis. It is common for production workers to earn wages, since they are usually paid via an hourly rate.
The amount of wages and related expenses that have been incurred by the employer (and earned by the employees) but have not yet been paid.
An allocation based on some proportions. For example, a corporation’s taxable income that was earned in many of the U.S. states might be allocated or apportioned to the states in which the corporation has conducted...
This current liability account reports the amount a company’s employees have earned in holiday pay, vacation pay, and sick days but have not yet taken as of the date of the balance sheet.
Revenue that has been earned but not yet invoiced to the customer.
A revenue account in a bank’s general ledger that indicates the amounts earned by the bank by servicing its customers’ accounts at the bank.
Usually a current asset that reports the amount of rent that the landlord/owner has earned, but has not been received as of the date of the balance sheet.
The amount of vacation that an employee has earned but has not yet taken.
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
Under the accrual basis of accounting this income statement account reports the amount of commissions expense that pertains to the revenues earned by the company during the accounting period shown in the heading of the...
The current liability account which reports the amount of salaries earned by a company’s employees, but which have not yet been paid by the company.
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 tax imposed on income earned by a nonprofit that is unrelated to its exempt purpose.
The account in which the owner’s investment is recorded plus the net income earned by the company minus the draws made by the owner. Current year net income and draws will be in temporary accounts until the end of...
Featured Review
"My background includes a hotel management degree, and I also have an accounting diploma. I became a PRO user as my mother tongue is Greek, but I needed to learn accounting terminology in English in order to work in the UK. AccountingCoach’s materials are very good, as they explain in plain language what every term means so as to be easily understood by anyone, whether or not they are in accounting. These materials have helped me to learn and understand the matching terms in English so I could get an AAT Level 3 Diploma. Thank you very much for all this useful information, which is updated frequently." - Angeliki A.
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: