Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
The owner’s equity accounts are the owner’s capital account and the owner’s drawing account. During the year the income statement accounts (revenues, expenses, gains, losses), the owner’s drawing...
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
An employee that must be paid overtime pay when the employee’s weekly hours exceed 40 hours. Some states may have additional requirements. Nonexempt employees include both hourly-paid and salary-paid who are not...
The owner’s equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor’s...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
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In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
This preferred stock feature assures the owner that any omitted dividends on this stock will be made up before the common stockholders will receive a dividend. Any omitted dividends on cumulative preferred stock are...
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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...
A detailed plan with dollar amounts. Examples of budgets used in business include the cash budget, sales budget, production budget, department budgets, the master budget, and the capital expenditures budget. Some budgets...
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not...
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
The stockholders’ equity account that represents the amount paid to a corporation for its preferred stock that was in excess of the preferred stock’s par value. This account is sometimes referred to as the...
An asset account used to record amounts given to an employee with the expectation of repayment. For example, if an employee is given money by a company and the money is expected to be repaid or spent for company...
An organization established by the U.S.’s Sarbanes-Oxley Act to oversee the auditors of corporations whose stock is publicly-traded. The PCAOB’s board members are appointed by the Securities and Exchange...
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
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Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
A subgroup of a nonprofit’s supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
Refers to the accounting associated with the preparation of the main financial statements: income statement, balance sheet, statement of cash flows, statement of retained earnings, statement of stockholders’...
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
The first-in, first-out cost flow assumumption under the perpetual inventory system. The first (oldest) costs are the first costs removed from inventory at the time that goods are sold. The most recent costs will remain...
A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
This group preceded the current Financial Accounting Standards Board (FASB). The APB members served in a part-time capacity to determine the accounting standards from 1962 to 1973. The accounting rules established by the...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
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