Income based upon some assumptions.
Income based upon some assumptions.
The sale, retirement, or exchange of property, plant and equipment.
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...
Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
The estimated scrap value at the end of the useful life of an asset used in the business. It is also referred to as residual value.
A liability account in a bank’s general ledger that indicates the amounts owed to bank customers for the balances in the customers’ individual checking, savings, and certificate of deposit accounts.
The amount of cash that could be received if a whole life insurance policy were canceled.
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
Statement of Cash Flows. See Explanation of Cash Flow Statement.
Allowing a person or company to purchase goods or services without paying cash at the time of purchase.
Regular fees or charges often paid to an organization at regular intervals. For example, a state CPA organization might have annual dues of $200.
This current liability account reports the amount a company owes (must remit) for its employees’ Social Security and Medicare taxes as of the date of the balance sheet.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
See direct labor efficiency variance and direct labor rate variance.
A form of business entity having partners. (Consult with an attorney about this form of entity versus alternatives.)
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
The expense incurred during the time interval indicated on the income statement for using rented equipment.
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 direct method could refer to the method of preparing the statement of cash flows. The direct method could also refer to the method of allocating a manufacturing facility’s service departments to its production...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
A temporary account that is debited when cash dividends have been declared (instead of debiting the Retained Earnings account. At the end of the accounting year, the balance in this account is transferred to the Retained...
An employee fringe benefit provided by an employer that allows employees to be paid for a limited number of days per year when the employees are ill.
A current asset that reports the amount paid for advertising that has not yet taken place. When the advertising occurs the prepaid advertising is reduced and advertising expense is recorded.
A formal, written promise to pay interest and to repay the principal amount.
The debit or credit balance that would be expected in a specific account in the general ledger. For example, asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and...
The contra owner’s equity account used to record the current year’s withdrawals of business assets by the sole proprietor for personal use. This is a temporary account with a debit balance. It will be closed...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
A shortened version of the term bank reconciliation or bank statement reconciliation.
The interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.
A trademark associated with a service rather than a product.
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
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