What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
What is accrued income? Definition of Accrued Income Accrued income is an amount that: A company has earned The company has a right to receive The collection is probable Has not yet been recorded in the general ledger...
The accounting term that means an entry will be made on the left side of an account. To learn more about debits and credits, see our Debits and Credits Outline.
Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
This current liability account reports the amount a company owes the state governments as of the balance sheet date for the state income taxes withheld from its employees’ salaries and wages.
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
The accounting and reporting standards developed by the International Accounting Standards Board (IASB). IFRS are used by business entities in most countries. The most notable exception is the U.S. where business...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
See exchange of similar nonmonetary assets.
To enter an amount on the right side of an account. Normal entries to revenue accounts are credits. Liabilities normally have credit balances. To learn more about debits and credits, see our Debits and Credits Outline.
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
What is interest payable? Definition of Interest Payable Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. [Interest payable...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance? An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease...
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
A corporation has a large balance in retained earnings. Does that mean that its dividends to stockholders will be increasing? Definition of Retained Earnings Retained earnings is one part of a corporation’s...
What is an annuity in present value calculations? In present value calculations, an annuity is a series of equal cash amounts occurring at equal time intervals. The identical cash amounts are sometimes referred to as...
What is the 13-point average for inventory? The 13-point average for inventory for the calendar year 2023 would be the sum of the following: (the inventory amount at December 31, 2022 plus the 12 end-of-the-month amounts...
In accounting, are debit balances good? It is best if you accept the meaning that the word debit has had for 500 years: a debit is an amount entered on the left-side of an account. Don’t add “good” or “bad” or...
What is a deposit in transit? Definition of Deposit in Transit A company’s deposit in transit is the currency and customers’ checks that have been received and are rightfully reported as cash on the date received,...
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
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...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real account....
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
Would you please explain unearned income? Definition of Unearned Income Unearned income or deferred income is a receipt of money before it has been earned. This is also referred to as deferred revenues or customer...
Should I delay graduation for an accounting internship? If an accounting internship is optional, there are many factors to consider. The students who have been leaders in their college accounting organizations and have...
What is the difference between information and data? I was taught that information is useful data. The point is there are lots of data (plural of datum) everywhere, and most of the data will not be useful to a decision...
What is a comparative income statement? A comparative income statement will consist of two or three columns of amounts appearing to the right of the account titles or descriptions. For example, the income statement for...
What does 2/10 mean in accounting? Definition of 2/10 2/10 is part of an early payment discount that allows a customer or client to pay after the sale or service has been provided. This sales discount allows the...
U.S. social security system.
This is a national organization of certified public accountants. For more information go to www.aicpa.org.
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
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