Generally, securities that can be sold quickly in the stock or bond market and where the investor’s intention is to sell them within one year of the balance sheet date.
Generally, securities that can be sold quickly in the stock or bond market and where the investor’s intention is to sell them within one year of the balance sheet date.
Asset, liability, and owner’s equity accounts. Also referred to as permanent or real accounts. To learn more, see Explanation of Balance Sheet.
The four largest public accounting firms in the U.S.: Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers. Typically, these four firms perform the audits of the largest publicly-traded corporations.
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
In payroll processing, the withholding of money from an employee’s wages or salary as ordered by a court. The money is then remitted by the employer to the agency specified by the court. To learn more, see...
A financial statement that reported the changes in a company’s working capital. The funds flow statement has been replaced by the statement of cash flows.
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
The amount in a bank account according to the bank’s records.
A corporation’s net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).
The stockholders’ equity account that reports the amount paid to a corporation that is in excess of the common stock’s stated value. The stated value of each share issued is recorded in the Common Stock...
The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of the bond’s face amount.
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 phrase used by FASB Statement 117 that describes the required focus of a nonprofit’s external financial statements. Previously the external financial statements focused on individual funds.
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
The date on which the board of directors of a corporation declares a dividend on the corporation’s stock. On this date an accounting entry is made to debit Retained Earnings and to credit Dividends Payable.
An action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
In accounting this term means a company’s net income, which is the bottom line of the income statement.
Under this method, net income is determined by analyzing the change in owner’s equity. The alternative is the transaction approach in which each transaction is recorded, sorted and stored.
A visual aid used by accountants to illustrate a journal entry’s effect on the general ledger accounts. Debit amounts are entered on the left side of the “T” and credit amounts are entered on the right...
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
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 form used at a bank to inform its customer that the customer’s account is being reduced for a fee or other charge.
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
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...
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
Errors made by the bank on a company’s bank account. These are usually infrequent but could include an incorrect amount of a check or deposit or a check or deposit recorded in the wrong account.
A nongovernment group of seven members assisted by a large research staff which is responsible for the setting of accounting standards, rules, and principles for financial reporting by U.S. entities. Go to www.fasb.org...
To eliminate debt such as a company’s repurchase or retirement of its outstanding bonds.
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
The combination of a manufacturer’s direct labor and factory overhead.
The amount at which the holder of preferred stock or bonds must sell the stock or bonds back to the issuing corporation. The call price is disclosed in the indenture. The call price might be the face or par amount plus...
A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
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.
An owner’s equity account that reports the amount the sole proprietor invested in the company plus earnings of the company not withdrawn by the owner.
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
A designation awarded by one of 50 U.S. states or five jurisdictions to a college graduate who has passed the rigorous Uniform CPA Exam and has met the required work experience. See Accounting Careers.
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...
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