What are gross wages? Definition of Gross Wages Gross wages are the amounts earned by employees before the payroll withholding taxes and other deductions are subtracted. Sometimes gross wages is used to describe the...
What are gross wages? Definition of Gross Wages Gross wages are the amounts earned by employees before the payroll withholding taxes and other deductions are subtracted. Sometimes gross wages is used to describe the...
What are the effects of overstating inventory? Definition of Overstating Inventory Overstating inventory means that the reported amount for the cost of a company’s inventory is greater than the actual true cost based...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
What is transfer pricing? Definition of Transfer Pricing Transfer pricing involves setting a price that will be used when one responsibility center of a company sells goods or services to another responsibility center of...
Where do you account for payroll taxes on the income statement? Definition of Payroll Taxes Payroll taxes are based on the wages (salaries, commissions, bonuses, etc.) of a company’s employees and on a self-employed...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
What is payroll accounting? Definition of Payroll Accounting Payroll accounting involves a company’s recording of its employees’ compensation including: gross wages, salaries, bonuses, commissions, and so on that...
What is the FUTA tax? Definition of FUTA Tax FUTA is the acronym for the Federal Unemployment Tax Act and is associated with a federal payroll or employment tax paid solely by the employer. (This unemployment tax is in...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires that...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...
What if a company's Allowance for Doubtful Accounts is understated? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account. The Allowance account’s credit balance is...
What is meant by overabsorbed? Overabsorbed is usually used in the context of a manufacturer’s production overhead costs. Since manufacturing overhead costs are not directly traceable to products, they need to be...
Why is manufacturing overhead allocated to products? Definition of Manufacturing Overhead Allocated to Products Manufacturing overhead refers to the indirect production costs of producing goods, products, component...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Standard Costing(Quick Test #2) Download PDF After you have answered all 35 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Financial Ratios Financial Ratios Including Limitations Financial ratios are one component of financial analysis. Financial ratios are often calculated by using amounts from previously issued annual financial statements....
Stockholders' Equity Stockholders’ Equity A business corporation’s owners are referred to as stockholders or shareholders because they hold stock certificates which provide evidence of their share of ownership in the...
Payroll Accounting(Quick Test #3 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
Stockholders' Equity For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Accounting Basics Accounting Basics Accounting basics is often described by the following actions: Recording the vast number of transactions that a business (or other organization) experiences. Sorting and storing the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our income statement shows wide fluctuations in utilities expense from month to month. I suspect our accounting is not proper. Any suggestions? Under accrual accounting, your income statement should report the amount for...
What are mixed costs? Definition of Mixed Costs In accounting, the term mixed costs refers to costs and expenses that consist of two components: A fixed component, the total of which does not change as the volume of...
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
What is the difference between net cash flow and net income? Definition of Net Cash Flow Net cash flow is the combination of the cash received and the cash disbursed. In other words, it is the combination of the debit...
What do negative variances indicate? Definition of Negative Variances on Accounting Reports Negative variances are the unfavorable differences between two amounts, such as: The amount by which actual revenues were less...
What do overabsorbed and underabsorbed mean? Definition of Overabsorbed and Underabsorbed In cost accounting, overabsorbed and underabsorbed pertain to a manufacturer’s manufacturing overhead costs. The manufacturing...
Will every transaction affect an income statement account and a balance sheet account? Definition of Income Statement and Balance Sheet Accounts A company’s general ledger accounts are arranged into two categories...
What is the difference between wages and salary? You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction… Definition of Wages Wages are...
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
What is the employer matching of FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act, which requires employers to withhold the following from each employee’s paycheck: Social Security...
Should inventories be reported at their cost or at their selling prices? Definition of Inventory Cost Inventories are reported at cost, not at selling prices. A retailer’s inventory cost is the cost to purchase the...
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