Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
A current liability account which reflects the amount of income taxes currently due to the federal, state, and local governments.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
The United States Internal Revenue Code which contains the federal laws and regulations pertaining to federal taxes.
A highly summarized income statement
See direct materials inventory.
See income statement. To learn more, see Explanation of Income Statement.
See compound interest.
A revenue, expense, gain, or loss account. To learn more, see Explanation of Income Statement.
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...
A document filed when a corporation is formed. Among other things, it lists the number of shares of stock that the corporation is authorized to issue.
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
Inventory that is less than the expected amount. It might be associated with theft or damage.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
The situation where the number of units sold is not influenced by a change in selling price. In other words, a price increase does not have a corresponding decrease in the number of units sold.
The interest rate specified or stated in a note payable or in a bond payable. Often this rate is fixed and will not change during the life of the note or bond.
Life insurance without a cash value.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
Someone who performs a task for a company, but is not an employee. The IRS has criteria to assist in distinguishing between an independent contractor and an employee.
See inventory: finished goods (FG).
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
The amount of rent that has been earned by the landlord or owner during the accounting period shown in the heading of the income statement, but it has not been received as of the last day of the accounting period.
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.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
The current asset that represents the amount of interest revenue that was reported as earned, but has not yet been received.
An income statement with at least two columns of amounts. The column of amounts that is closest to the words will contain the amounts for the most recent period of time. The columns furthest from the words will be the...
See inventory: finished goods (FG).
The balance sheet classification that is reported immediately after current assets and before property, plant, and equipment.
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity due. An example would be the monthly rent on an apartment.
Bookkeeping Video Training Part 11 Introduction to internal control for safeguarding assets: 3-way match, segregation of duties Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
Does the income statement explain the change in the equity section of a balance sheet? The income statement could explain the change in the equity section of a balance sheet. However, there are likely to be some other...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
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...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined...
Accounting estimates include the estimated salvage value and the estimated useful life of depreciable assets, estimated percentage of bad debts expense, estimated percentage of units to be repaired or replaced during a...
An effort to have materials delivered by suppliers just as the materials are needed, thereby eliminating the need for the buyer to store inventories of component parts. Obviously, the buyer is relying on the...
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
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