Financial Statements Video Training Part 8 Balance sheet: working capital, current ratio, financial leverage, notes to financial statements, comparative balance sheets Must-Watch Video Learn How to Advance Your...
Financial Statements Video Training Part 8 Balance sheet: working capital, current ratio, financial leverage, notes to financial statements, comparative balance sheets Must-Watch Video Learn How to Advance Your...
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
The ABC inventory system is different from activity-based costing. The ABC inventory system is used in order to focus on the most important items in inventory. Usually a relatively few items will account for a very...
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
An asset account used to record a loan to another party that has real estate as collateral.
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...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
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equity account that reports the amount the sole proprietor invested in the company plus earnings of the company not withdrawn by the owner.
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
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...
See petty cash replenishment.
The stockholders’ equity account that represents the amount paid to a corporation for its preferred stock that was in excess of the preferred stock’s par value. This account is sometimes referred to as the...
See perpetual system of inventory.
A liability account whose balance is the unpaid principal balance as of the balance sheet date. The amount of principal required to be paid within 12 months of the balance sheet date is reported as a current liability....
See death spiral.
What is a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
A journal entry with more than the minimum of one debit and one credit. Example: a debit to Cash of $500 and a credit to Sales of $475 and a credit to Sales Tax Payable of $25.
This term is usually associated with assets that are depreciated. In the month that an asset is acquired or disposed, it is assumed to have occurred in the middle of the month.
See job order costing.
The amount owed to employees as of a specified date for the amount of vacation pay that has been earned but has not been taken. For example, the accrued vacation pay as of December 31, 2023 is the amount the employees...
The systematic allocation of the costs incurred to issue bonds (reported in a contra liability account) to Interest Expense over the life of the bonds.
A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
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...
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 accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
See weighted-average cost flow assumption and moving-average cost of inventory.
What is capex? Definition of Capex Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following: Actual amounts that were spent during...
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
The cost to operate office equipment during a specified time interval.
See variable manufacturing overhead efficiency variance.
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
Usually a current liability that reports the amount of rent that the tenant has incurred but has not paid as of the date of the balance sheet.
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
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