centers will often include: Each of its production departments Each of the service departments or support departments within a production facility, such as the maintenance department and quality control department A...
centers will often include: Each of its production departments Each of the service departments or support departments within a production facility, such as the maintenance department and quality control department A...
to describe the amount that it is subtracting from its sales revenue to report the amount of its gross profit or gross margin. Companies that provide services will use the term cost of services or cost of service...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
on the Balance Sheet Assume that you own and operate a sole proprietorship. You provided a service to a client and earned revenues of $900 and had no expenses. One of the business assets (cash or accounts receivable)...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
How do you determine whether a person is an independent contractor or an employee? To assist you in determining whether someone is an independent contractor or an employee, you should refer to the Internal Revenue...
How is a voucher used in accounts payable? Definition of Voucher A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company’s internal control over payments to...
: Public accounting as a sole practitioner or as a member of small to international CPA firms working as an auditor, tax consultant, general consultant, etc. Manufacturing companies, service businesses, etc. working as...
borrows the money for the construction from its local bank. The accounting rules state that the interest incurred for self-constructing the building should be added to the cost of the building. (The FASB refers to this...
the accrual basis of accounting. Example of Wages and Salaries Expense Assume that a new service business begins in December and has a staff of 6 hourly-paid employees who are paid each Friday for the hours they worked...
What is value billing? Value billing is a way of billing a client for services provided. Basically, the amount billed is based on the value of the service (or information) instead of the number of hours spent. The...
classify and report their expenses on their internal income statements by the following functions: Manufacturing (further classified by production departments and factory service departments) Selling, general...
FOB Destination. The supplier ships the goods via United Parcel Service at a cost of $50. The supplier’s income statement will report sales of $700. In addition, it will report the operating expense carriage outwards...
At what point are revenues considered to be earned? Revenues, which are derived from an entity’s main activities such as the sale of merchandise or the performance of service, are considered to be earned when the...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
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...
The cost of telephone service that was used during the period shown on the income statement.
A tax status allowed by the U.S. Internal Revenue Service.
The direct method could refer to the method of preparing the statement of cash flows. The direct method could also refer to the method of allocating a manufacturing facility’s service departments to its production...
A directive to a company’s bank to not honor (pay) a specific check that the company had written. The company making the request will be charged a fee by the bank for this service.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
A status granted by the U.S. Internal Revenue Service (IRS) to nonprofits applying and meeting certain conditions. This status means that the nonprofit organization is not subject to federal income taxes. It also means...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
Usually refers to a statement from the bank showing the activity in a company’s checking account. The statement includes the deposits received by the bank, checks paid by the bank, bank service charge, and other...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...
Billing a client based on the value of the information or service provided rather than billing based on time spent.
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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...
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...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
A liability account used to record an amount received from a customer before a service has been provided or before goods have been shipped. This account is referred to as a deferred revenue account and could be entitled...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
Featured Review
"AccountingCoach has truly been a blessing, and has changed my life! I am a small-business owner and accountant. I became a PRO member because I am relatively new to the accounting industry, and the course offers instructions with detailed steps, answering the ‘why’ to all of my accounting questions. I can totally tell that this course was designed by an accountant, which makes it the absolute BEST! The materials are amazing; I can download tons of templates and Excel spreadsheets, view videos, and listen to MP3 audio files. I have really benefited from the materials in a great way. The quizzes build my confidence, while confirming that I am grasping and retaining the information. I love that I can always go back and search for a topic, and it comes right up so I can learn from the resources provided. This course has made me love accounting more than I ever dreamed!" - Ra'Chael B.
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: