Also referred to as the useful life. This differs from the physical life of an asset. For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
Also referred to as the useful life. This differs from the physical life of an asset. For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
See accelerated depreciation.
A corporation’s reported net income and earnings per share for a three-month period.
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
See deferred expense.
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
The increase in a carrying amount. Also see write-up work.
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
See accrual-type adjusting entry.
In standard costing, the quantity variance could be the direct materials’ usage variance or the direct labor’s efficiency variance. The quantity variance is the difference between the quantity of inputs that...
A reduction in the original selling price.
Corporations whose stock is traded on stock exchanges. Also referred to as publicly-traded corporations.
What conditions cause a discount on bonds payable? Discount on bonds payable occurs when a bond’s stated interest rate is less than the bond market’s interest rate. If a $1,000,000 bond issue promises to pay interest...
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
See consistency.
Also referred to as manufacturing overhead, factory overhead, indirect manufacturing costs, or manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
A long-term asset which indicates the cost of the constructed improvements to land, such as driveways, walkways, lighting, and parking lots. Land Improvements will be depreciated over their useful life by debiting the...
See notes to financial statements.
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
See return on investment (ROI).
Inventory that is less than the expected amount. It might be associated with theft or damage.
What is the difference between Social Security and Medicare payroll taxes? Social Security Payroll Tax The Social Security payroll tax is 6.2% and is based on each employee’s earnings (wages, salaries, bonuses,...
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
See premium on bonds payable.
See debenture bond.
See accrued rent expense. Also see accrued rent income.
The sales invoice or bill issued by a vendor and received by the buyer. The customer will also refer to the supplier invoice as the vendor invoice.
Often referred to as write-up work, a compilation refers to financial statements prepared by an accountant without reviewing or auditing the amounts. Often the accountant merely takes a client’s amounts and...
The amount before deductions. For example, gross pay is the amount before withholding deductions. Gross sales is the amount before sales returns and allowances and sales discounts.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favorable variance occurs when the actual revenues are greater than the budgeted...
Occurring twice per month. For example, if salaried personnel are paid on the 15th and the last day of the month, we would say they are paid semimonthly. People paid semimonthly will receive 24 paychecks during a year....
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
Usually this refers to manufacturing employees who are not classified as direct labor. Material handlers, mechanics, setup workers, clean up workers are a few examples of indirect labor.
Featured Review
"I am now a bookkeeper for a small company, thanks to AccountingCoach PRO Plus. PRO Plus’ material helped me understand debits and credits; the examples and the breakdown of the financial terminology helped me understand the role of debits and credits and how everything comes together, which also helped me understand how they play a part in the financial statement. This made it easy for me to explain the owners’ overall financial picture to them. I like how a certificate is given at the end of the exam. I was able to use the certificate to land my current job. I will continue to use PRO Plus; my goal is to become my own boss and open a bookkeeping company." - Denise W.
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: