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...
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...
Noncurrent assets. Assets that are not intended to be turned into cash or be consumed within one year of the balance sheet date. Long-term assets include long-term investments, property, plant, equipment, intangible...
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...
Obligations of the enterprise that are not payable within one year of the balance sheet date. Two examples are bonds payable and long term notes payable.
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.
Federal government securities sold at a discount (because of no interest payments) with maturity dates of less than one year.
A budget that continuously shows the amounts for a full year into the future. As a month or quarter actually occurs, it is removed from the budget and is replaced by the budgeted amounts for a month or quarter in the...
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
The 500 year-old accounting system where every transaction is recorded into at least two accounts. To learn more, see Explanation of Debits and Credits.
Usually an annual manufacturing overhead rate established just prior to an accounting year and based on budgeted amounts.
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.
The variable manufacturing costs other than direct materials and direct labor that have been assigned to the products manufactured via a predetermined rate. Ideally, by the end of the accounting year the amount applied...
Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
Also referred to as real accounts. Accounts that do not close at the end of the accounting year. The permanent accounts are all of the balance sheet accounts (asset accounts, liability accounts, owner’s equity...
making a change, a company cannot switch back. For U.S. income tax reporting, a company must use the same cost flow assumption as it uses on its financial statements. Example of Difference Between FIFO and LIFO Let’s...
direct materials, direct labor, and manufacturing overhead. Manufacturers are also required to consistently follow their selected cost flow assumption. Examples of Inventory Valuation Assume that a new company purchased...
of $50,000 and had accumulated depreciation of $40,000 at the end of the previous accounting year. The first step is to record this year’s depreciation for the equipment being sold. Let’s assume the depreciation...
manufactured during an accounting year. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your...
. The Additional Medicare Tax is 0.9% (0.009) of an employee’s gross pay (wages, salaries, bonuses, etc.) that are in excess of $200,000 during a calendar year. The Additional Medicare Tax is in addition to the...
amounts will be greater than the benefit to the readers of the financial statements. To illustrate the logic of inflation accounting, let’s assume that the general inflation rate and the changes in the costs of...
increases when the volume decreases. Examples of Fixed Costs Assume the rent for a production facility is a fixed cost of $120,000 per year and there are normally 30,000 machine hours of good output during a year. At...
to the amount invested. The computed number of years is referred to as the payback period. To illustrate, assume that a company invests $100,000 today in a project that is expected to generate cash of $50,000 for two...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of 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...
the current value. For example, a computer might be depreciated over five years with equal amounts each year; however, the computer's value after one year may be only half of its cost. False Right! The purpose of...
for 15% of the dollars 70% of the items which account for 5% of the dollars 10. Which of the following is the most logical calculation of a company’s inventory turnover? Select... Annual cost of goods sold divided by...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
currency translation, hedging, pensions, etc. statement of comprehensive income This financial statement begins with the bottom line of the income statement and is followed by items involving currency translation,...
who provided services and received $600 or more in a calendar year. Form 1099-NEC This U.S. Internal Revenue Service form must be issued to nonemployees who provided services and received $600 or more in a calendar...
Accounting Basics Accounting Basics Accounting basics is often described by the following actions: Recording the vast number of transactions that a business (or other organization) experiences. Sorting and storing the...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
statement’s heading indicates a period of time (or time interval) such as the year ending December 31? Select... Balance sheet Income statement 3. Total revenues minus total expenses is __________. Select... gross...
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