This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed...
This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed...
. Examples of Production Costs A manufacturer’s production costs consists of the costs for the following: Direct materials Direct labor Manufacturing overhead Join PRO to Track Progress Mark the Question as Read...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
The length of time that an asset would last. Instead of the physical life, accountants focus on the useful life. For example, a computer’s physical life is perhaps 50 years. However, its useful life is likely to be...
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 variance arising in a standard costing system that indicates the difference between 1) the standard cost of the direct labor that should have been used (the standard hours times the standard rate) for the good output,...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
A potential loss that is dependent upon some future event occurring or not occurring. If the loss is probable and the amount can be estimated, then the loss and a liability are recorded with a journal entry. If the loss...
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...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that...
Also referred to as a “p.o.” A multi-copy form prepared by the company that is ordering goods. The form will specify the items being ordered, the quantity, price, and terms. One copy is sent to the vendor...
Usually referred to as the SEC. The U.S. government agency which has regulatory power over the U.S. stock exchanges and the reporting requirements of the corporations whose stock is traded on those stock exchanges. The...
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
become wider in more advanced accounting topics, which are not presented on AccountingCoach.com. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
The accounts outside of the general ledger which provide the detail for the balance reported in a general ledger account. (The account in the general ledger is known as the control account.) For example, each credit...
This current liability account reports the ”net” amount a company owes its employees as of the date of the balance sheet. The ”net” amount is the amount of the employees’...
Benefits given to employees that are in addition to wages and salaries. Examples include health, dental, life, vision, and disability insurances, employer’s portion of social security and Medicare tax, paid...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
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...
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...
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
A company’s sales in a market as compared to the total sales in that market. For example, General Motors share of the U.S. market has decreased from more than 50% in the 1960’s to its present market share of...
An income statement account that reports the amount of service revenues earned during the time interval indicated in the heading of the income statement. (Under the accrual basis of accounting, fees earned are reported...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
A professional certification awarded to an accountant who has successfully completed the CMA Exam and has achieved the required work experience. The certified management accountant is recognized as a person with a strong...
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
is a credit. A debit is also the amount entered on the left-side of a T-account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
An adjunct account is a valuation account that increases the book value or carrying value of a liability account. For example, the account Unamortized Premium on Bonds Payable (or simply Bond Premium) is an adjunct...
markets such as private placements for stocks, bonds, and other debt. 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...
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