Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
in financial statements that will be more complete and useful. The financial statements are interconnected and should always be in balance because of the accounting equation and double-entry accounting system....
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
they are earned (which often occurs before the receipt of cash). The accrual method also means that expenses will appear on the income statement when they best match the revenues or when a cost expires or is used up...
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...
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...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
What is ERP? Definition of ERP In accounting, ERP is the acronym for enterprise resource planning. ERP could be described as a database software package that supports all of a business’s processes and operations...
What is float? Definition of Float In accounting and bookkeeping, float is the time between the writing of a check and the time that the check clears the bank account on which it is drawn. Examples of Float Payer...
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
How do you record a deposit on utilities? Definition of Deposit on Utilities A new customer of a public utility (electricity, natural gas, telephone, etc.) may be required to pay a refundable amount known as a utility...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
How are period costs reported in the financial statements? Under the accrual method of accounting, period costs such as selling, general and administrative expenses are reported on the income statement in the accounting...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
What is the units of activity depreciation? Definition of Units-of-Activity Depreciation The units-of-activity depreciation is unique among the common methods of depreciation in that the useful life of the asset being...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
How can a business increase its cash flow from operations? A business can increase its cash flow from operations (or operating activities) by looking closely at each of its current assets and current liabilities. For...
What is the annual wage limit? Definition of Annual Wage Limit Annual wage limit is a payroll accounting term that is associated with the Social Security payroll tax. (The annual wage limit is also known as the annual...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
What does drop ship mean? One example of drop ship is a manufacturer shipping goods directly to one of its customers’ customer (instead of delivering the goods to the customer that placed the order with the...
What is the difference between FIFO and LIFO? Difference Between FIFO and LIFO The difference between FIFO and LIFO will exist only if the unit costs of a company’s products are increasing or decreasing. U.S. companies...
What is a comparative income statement? A comparative income statement will consist of two or three columns of amounts appearing to the right of the account titles or descriptions. For example, the income statement for...
What is notes receivable? Definition of Notes Receivable Notes receivable is an asset of a company, bank or other organization that holds a written promissory note from another party. (The other party will have a note...
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is a capital account? Definition of Capital Account In accounting and bookkeeping, a capital account is a general ledger account that is part of the balance sheet classification: Owner’s equity (in a sole...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings, profits). The...
What is the meaning of arrears? In accounting we use the word arrears in at least two ways. One use involves the omitted dividends on cumulative preferred stock. For example, if a corporation has cumulative preferred...
Is the sales tax on merchandise purchased for resale included in inventory? In our state, sales tax is paid only by the end customer. In other words, a retailer does not pay sales tax on merchandise that is purchased for...
What is a calendar year? Definition of Calendar Year A calendar year is the 12 consecutive months from January through December. In other words, it is the 365 days (366 days in a leap year) beginning on January 1 and...
What is the income summary account? Definition of Income Summary Account The Income Summary account is a temporary account used with closing entries in a manual accounting system. (Computerized accounting systems may...
What is the cost of goods manufactured? Definition of Cost of Goods Manufactured The cost of goods manufactured is a calculation of the production costs of the goods that were completed during an accounting period. In...
How do you determine whether a person is an independent contractor or an employee? To assist you in determining whether someone is an independent contractor or an employee, you should refer to the Internal Revenue...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
Featured Review
"I registered for AccountingCoach PRO to help me with basic accounting information for some MBA coursework I am pursuing. It turned out to be a lot more than that! In its clear, yet comprehensive manner, AccountingCoach provides foundational materials, sample exams, study notes, visual aids, and dictionary terms. If you have any need for assistance with all things accounting, AccountingCoach should be your first stop. I highly recommend it to everyone wanting to understand accounting in more depth." - David T.
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: