The exchange or trade-in of a long-term asset for a completely different long-term asset. For example, exchanging an antique car for land.
The exchange or trade-in of a long-term asset for a completely different long-term asset. For example, exchanging an antique car for land.
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
See double declining balance method of depreciation.
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 The funds flow statement has been replaced by the statement of cash flows.
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
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...
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...
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
What does arms length transaction mean? Definition of Arms Length Transaction An arms length transaction exists when two independent (unrelated) parties are each attempting to get the best deal possible. Example of Arms...
A tax imposed on income earned by a nonprofit that is unrelated to its exempt purpose.
A loan in which the interest rate does not change over the life of the loan.
What is depletion? Definition of Depletion In accounting, depletion refers to the expensing of a company’s cost of a natural resource. Ultimately, it means moving a natural resource’s cost from the company’s...
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
See direct materials usage variance.
The preparation of financial statements from a client’s information and without any review or audit of the amounts.
A table showing the present value factors to be applied to the recurring equal amount occurring at the end of each equal time interval.
Federal government securities with a fixed interest rate and maturing in more than 10 years.
The percentage resulting from dividing dividends per share by earnings per share.
The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...
The cost accounting system where similar units are mass produced. Costs are collected by department and are then assigned to the units produced.
See paid-in capital in excess of par value – common stock.
A balance sheet with classifications (groupings or categories) such as current assets, property plant and equipment, current liabilities, long term liabilities, etc. To learn more, see Explanation of Balance Sheet.
Financial statements prepared by an accountant based on the amounts provided by a client. The accountant does not review or audit the amounts provided and therefore does not provide any assurances regarding the validity...
The date a corporation pays a dividend to its shareholders. On this date the accounting entry will be a debit to Dividends Payable and a credit to Cash.
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...
A business organization different from a sole proprietorship, partnership, and corporation. As the name implies it provides the limited liability protection usually associated with a corporation. To learn more about this...
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