In accounting this term means a company’s net income, which is the bottom line of the income statement.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
A method of payment used in place of a paper check.
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
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...
See current ratio.
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
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 rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
Under accrual accounting it is the rent earned during the period indicated in the heading of the income statement, regardless of when the money is received from the tenant.
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
See return on investment (ROI).
See inventory: work-in-process (WIP).
The average balance in the account Accounts Receivable during a period of time. Since the amount reported in the Accounts Receivable account is the ending balance on one specific day, it is necessary to compute an...
See Public Company Accounting Oversight Board (PCAOB).
See paid-in capital in excess of par value – common stock.
Also referred to as the current interest rate, the yield-to-maturity, and the effective interest rate. The market interest rate is always changing whereas the stated interest rate does not change.
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
A journal entry made on the first day of a new accounting period to undo the accrual type adjusting entries made prior to the preparation of the financial statements dated one day earlier. Reversing entries allow for an...
Part of a company’s administration that is responsible for preparing the financial statements, maintaining the general ledger, paying bills, billing customers, payroll, cost accounting, financial analysis, and...
Also known as a CD. A bank time deposit (savings deposit) that cannot be withdrawn until a specified date. For example, a CD might mature in 6, 9, 12, or 18 months. If the amount deposited in a CD needs to be withdrawn...
See bill of materials.
See phantom profits.
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
The elimination of part or all of a markdown.
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
An asset account in a bank’s general ledger that indicates the amounts owed by borrowers to the bank as of a given date.
The sale, retirement, or exchange of property, plant and equipment.
See discounted cash flow model.
See sales.
See Explanation of Standard Costing.
See contingent gain.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
A document that discloses various conditions and terms of the company’s bonds. It would include the call price, collateral, ramifications if interest is not paid, etc.
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...
Accounts that are closed at the end of each accounting year. Included are the income statement accounts (revenues, expenses, gains, losses), summary accounts (such as income summary), and a sole proprietor’s...
What are the limitations of the balance sheet? Definition of Balance Sheet The balance sheet is one of the main required financial statements. It is also known as the statement of financial position. The balance sheet...
Analyzing financial statements by using financial ratios, horizontal analysis, and vertical analysis. To learn more, see Explanation of Financial Ratios.
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