The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
See our Standard Costing Outline.
See direct costing.
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...
An asset’s cost that has been assigned to Depreciation Expense.
but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense Credit Wages Payable or credit Accrued Wages Payable Wages...
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...
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
One hundredth (1/100) of a percentage point. In other words, one percentage point is equal to 100 basis points. The difference between an interest rate of 6.5% and 6.75% is 25 basis points.
Current assets minus current liabilities.
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
A budget that flexes with volume. Under a flexible budget the budgeted amount of manufacturing overhead will increase if the company produces more units than planned. The flexible budget will decrease if the company...
The acronym for cost of sales or for the cost of services.
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
The entry made in a journal. It will contain the date, the account name and amount to be debited, and the account name and amount to be credited. Each journal entry must have the dollars of debits equal to the dollars of...
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
Long term assets that are not classified as investments, property, plant, equipment, or intangible assets. An example is bond issue costs that are amortized to expense over the life of the bonds.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
See membership dues.
Bonds with one maturity date (as opposed to serial bond).
See earnings per share.
To record accounting entries into a journal.
An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
The cost transferred from one department to the next department in a process costing system.
This is the classification shown on a single-step income statement which reports the operating revenues, nonoperating revenues, and gains in one section of the income statement. Revenues and gains enhance the...
A right to buy a specific number of shares of stock at a specific price by a specific date.
The owner of property that often receives rent from tenants.
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
See stockholder.
See Internal Revenue Service (IRS).
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