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...
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 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...
The basic general rules upon which more detailed accounting standards are built. To learn more, see Explanation of Accounting Principles.
A term often used when referring to office workers, managers, professionals, and executives. These employees’ pay is often stated as a salary for a month (and not as an hourly pay rate).
See pass-through contributions.
See death spiral.
A retirement plan that does not specify the amount that a retiree will receive. Rather, the employer’s obligation is to contribute a specific amount into a fund to be used for payments to retirees.
A balance sheet line to report short-term liabilities that are too insignificant to be identified separately.
See contractual interest rate.
See inventory: work-in-process (WIP).
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
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...
The percentage resulting from dividing dividends per share by earnings per share.
A balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
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...
A subgroup of the supporting activities of a nonprofit organization. This functional expense classification is used to report the overall management of the nonprofit organization other than the direct expenses of...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
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 fee for the printing of checks ordered by a company. Often the amount is deducted automatically from a company’s checking account by the company that printed the checks.
The net amount of gross sales on credit minus the sales returns, sales allowances, and sales discounts which pertain to the sales on credit.
Taxes assessed by states to cover unemployment benefits paid to unemployed workers who have been laid off or terminated by a company for specified reasons. This tax is paid by the employer but is computed by multiplying...
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...
This classification of net assets has been replaced by the FASB with the classification net assets with donor restrictions.
See discounted cash flow model.
See current asset.
Also referred to as operating expenses. These expenses are reported in the period in which they were incurred, not the period in which they were paid.
account with the title Inventory Change or with the title (Increase) Decrease in Inventory. This account is presented as an adjustment to purchases in determining the company’s cost of goods sold. Example of Inventory...
A stated legal amount for each share of preferred stock. The par value for every share of preferred stock issued must be recorded in the separate stockholders’ equity account Preferred Stock.
This indicates (on average) how many days it takes to sell the merchandise held in inventory. To learn more, see Explanation of Financial Ratios.
Financial Statements Video Training Part 11 Connection between the income statement and balance sheet Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job...
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...
Usually the top ranking officer of the corporation who is charged with executing the policies set by the board of directors.
See the Explanation of Break-even Point.
The annual report to the Securities and Exchange Commission (SEC), a U.S. government agency. The Form 10-K must be filed by corporations whose stock is publicly-traded on a U.S. stock exchange. The report contains the...
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.
Multiplying the individual items contained in each bill of material times the number of units expected to be produced during a specified time period. The result is the total quantity of each input that will be needed for...
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