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Chapters 1-12 of Dansby
Dansby Accounting I
249
Accounting
Undergraduate 1
02/03/2011

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Term
the process of recording, summarizing, analyzing, and interpreting financial (money-related) activities to permit individuals and organizations to make informed judgments and decisions
Definition
accounting
Term
the equation that expresses the relationship between the accounting elements in a simple mathematical formula: assets = liabilities + owner's equity; also referred to as the basic accounting equation
Definition
accounting equation
Term
a period for which accounting records are maintained, typically a year but can be as short as a month
Definition
accounting period
Term
the liability that results from purchasing goods or services on credit
Definition
accounts payable
Term
the asset arising from selling goods or services on credit to customers
Definition
accounts receivable
Term
an item with a money value owned by a business
Definition
asset
Term
a listing of the firm's assets, liabilities, and owner's equity at a specific point in time; also referred to as statement of financial position and position statement
Definition
balance sheet
Term
an organization that operates with the objective of earning a profit
Definition
business
Term
the principle stating that, for accounting purposes, a business is a distinct economic entity or unit that is separate from its owner and from any other business; requires that transactions of a business be recorded separately from the personal transactions of the business owner
Definition
business entity concept
Term
an asset including currency (paper money), coins, checks, and money orders made payable to the business
Definition
cash
Term
the principle that states that an asset should be recorded at its actual cost, even if the true market value of the asset is more or less than the price paid
Definition
cost principle
Term
a business or person to whom a debt is owed
Definition
creditor
Term
the principle stating that all business transactions are recorded as having at least two effects on the basic accounting elements (assets, liabilities, and owner's equity)
Definition
dual effect
Term
a physical asset used by a business in its operations
Definition
equipment
Term
principles of moral conduct that guide the behavior of individuals and businesses
Definition
ethics
Term
the costs of operating a business; does not provide a future benefit to the business and is thus a reduction in owner's equity
Definition
expenses
Term
summaries of financial activities
Definition
financial statements
Term
a summary of a business's revenue and expenses for a specific period of time, such as a month or a year; also referred to as earnings statement, operating statement, statement of operations, and profit and loss (P & L) statement
Definition
income statement
Term
a debt owed to a creditor, a party outside of the business
Definition
liability
Term
a type of business organization that combines features of a corporation and those of a partnership or sole proprietorship
Definition
limited liability company (LLC)
Term
a business that produces a product to sell to its customers to earn a profit
Definition
manufacturing business
Term
excess of revenue over total expenses; also referred to as net profit or net earnings; the opposite of net loss
Definition
net income
Term
excess of total expenses over revenue; the opposite of net income
Definition
net loss
Term
a formal written promise to pay a specified amount at a definite future date
Definition
note payable
Term
the difference between assets and liabilities; also referred to as capital, proprietorship, and net worth
Definition
owner's equity
Term
a business co-owned by two or more people
Definition
partnership
Term
a principle that states that revenue should be recorded when it is earned, even though cash may not be collected until later
Definition
realization principle
Term
income earned from carrying out the major activities of a firm
Definition
revenue
Term
a law, passed by Congress, requiring companies to certify the accuracy of their financial information and intended to restore the public's confidence in the financial statements of companies
Definition
Sarbanes-Oxley Act of 2002
Term
a business that performs services for customers to earn a profit
Definition
service business
Term
a change that occurs when one asset is exchanged for another asset, such as when supplies are purchased for cash; occurs when one asset goes up in amount and another goes down
Definition
shift in assets
Term
a business owned by one person
Definition
sole proprietorship
Term
a summary of the changes that have occurred in owner's equity during a specific period of time, such as a month or year; also referred to as a capital statement
Definition
statement of owner's equity
Term
short-term physical assets needed in the operation of a business
Definition
supplies
Term
capable of being touched; the quality of a physical asset
Definition
tangible
Term
any activity that changes the value of a firm's assets, liabilities, or owner's equity
Definition
transaction
Term
the removal of business assets for the owner's personal use
Definition
withdrawal
Term
an individual form used to record increases and decreases in a specific asset, liability, or owner’s equity item
Definition
account
Term
the difference between total debits and total credits to an account; determined by footing (adding) the debit side, footing the credit side, and subtracting the smaller total from the larger
Definition
balance
Term
to enter an amount on the right, or credit, side of the account; abbreviated as Cr.
Definition
to credit
Term
a balance that occurs when the amount on the credit side of an account is greater than the amount on the debit side
Definition
credit balance
Term
to enter an amount on the left, or debit, side of the account; abbreviated as Dr.
Definition
to debit
Term
a balance that occurs when the amount on the debit side of an account is greater than the amount on the credit side
Definition
debit balance
Term
A system in which each transaction is recorded as having at least two effects on the accounting elements; the sum of all debits must equal the sum of all credits
Definition
double-entry accounting
Term
a temporary owner's equity account used to record a business owner's withdrawals of cash or other assets from the business for personal use
Definition
drawing account
Term
the total of the debit column or credit column of an account
Definition
footing
Term
a grouping of all accounts a company uses
Definition
ledger
Term
the increase side of an account or where you would expect to find the balance of that account
Definition
normal balance
Term
a form of account with separate debit and credit sides
Definition
standard form of account
Term
skeleton version of the standard form of an account
Definition
T account
Term
Accounts whose balances will be transferred to the owner's capital account at the end of the accounting period; examples include expense accounts, revenue accounts, and the owner's drawing account
Definition
temporary owner's equity accounts
Term
a listing of all ledger accounts and their balances to test the equality of debits and credits in the ledger at the end of an accounting period, usually at the end of each month
Definition
trial balance
Term
the sequence of steps and procedures used to process and summarize accounting data during an accounting period
Definition
accounting cycle
Term
a standard ledger account form expanded to include two balance columns for keeping a running, or continuous, balance; also called the four-column account form
Definition
balance form of account
Term
the ledger to which amounts are transferred (posted) from the journal
Definition
book of final entry
Term
the journal in which transactions are first formally recorded
Definition
book of original entry
Term
a directory or listing of accounts in the ledger
Definition
chart of accounts
Term
an entry requiring three or more accounts
Definition
compound entry
Term
an entry used to correct certain types of errors in the ledger
Definition
correcting entry
Term
a ledger account number in the posting reference (P.R.) column of the journal and the journal page number in the P.R. column of the ledger account
Definition
cross-reference
Term
the basic form of journal that has two money columns
Definition
general journal
Term
a record in which business transactions are recorded in the order that they occur (chronological order, by order of date)
Definition
journal
Term
the process of recording transactions in a journal
Definition
journalizing
Term
an addition or subtraction mistake
Definition
math error
Term
the process of transferring transactions from the journal to the ledger
Definition
posting
Term
an incorrect transfer from the journal to an account or from the ledger to the trial balance
Definition
posting error
Term
the principle that proper accounting procedures have to be strictly followed only for events and transactions that would have an effect on a business's financial statements
Definition
principle of materiality
Term
the principle that source documents should form the foundation for recording business transactions
Definition
principle of objective evidence
Term
a mistake made in a journal entry
Definition
recording error
Term
a type of posting error caused by an incorrectly placed decimal point, such as entering 100 for 1,000
Definition
slide
Term
business documents or papers that prove business transactions occurred; the basis for journal entries
Definition
source documents
Term
a type of posting error caused by the reversal of digits, such as entering 240 for 420
Definition
transposition
Term
an entry made at the end of an accounting period to bring the balance of an account up to date
Definition
adjusting entry
Term
the difference between an asset's cost and its accumulated depreciation
Definition
book value
Term
an account whose balance is opposite the asset to which it relates; an account with a credit balance, because it is opposite to an asset account having a debit balance
Definition
contra asset account
Term
an allocation process in which the cost of a long-term asset (except land) is divided over the periods in which the asset is used in the production of the business's revenue; always recorded by debiting the Depreciation Expense account and crediting the Accumulated Depreciation account
Definition
depreciation
Term
adjusting entries that update the ledger without involving parties outside the business
Definition
internal transactions
Term
a rule of accounting that requires that revenue and expenses be recorded in the accounting period in which they occur; a rule stating that an accurate net income or net loss for an accounting period be reported by offsetting revenue earned by the expenses that were necessary to produce that revenue
Definition
matching principle
Term
a fee paid for insurance coverage that will benefit the business in the future
Definition
premium
Term
a popular method of calculating depreciation that yields the same amount of depreciation for each full period an asset is used
Definition
straight-line method
Term
an informal working paper used by the accountant to organize data for the financial statements and lessen the possibility of overlooking an adjustment
Definition
work sheet
Term
the basis of accounting that requires that revenue is recorded when earned, no matter when cash is received, and that expenses are recorded when incurred, no matter when cash is paid
Definition
accrual basis of accounting
Term
a basis of accounting where revenue is recorded only when cash is received, and expenses are recorded only when cash is paid
Definition
cash basis of accounting
Term
an account used to summarize the balances of other accounts
Definition
clearing account
Term
entries made at the end of an accounting period to transfer the balances of the temporary accounts to the owner's capital account
Definition
closing entries
Term
the process of transferring the balances of temporary accounts to the owner's capital account
Definition
closing process
Term
the period of time that covers a complete accounting cycle
Definition
fiscal period
Term
a fiscal period covering 12 months but not necessarily coinciding with the calendar year
Definition
fiscal year
Term
a clearing account used to summarize the balances of revenue and expense accounts that is used only at the end of an accounting period and is opened and closed during the closing process
Definition
Income Summary account
Term
a basis of accounting where revenue is recorded only when cash is received and expenses are recorded only when cash is paid; however, adjustments are made for expenditures for items having an economic life of more than one year-such as equipment, prepaid insurance, and large purchases of supplies
Definition
modified cash basis of accounting
Term
a fiscal year ending at a business's lowest point of activity
Definition
natural business year
Term
accounts such as assets, liabilities, and owner's capital whose balances will be carried into the next accounting period; accounts whose balances are not closed; also referred to as real accounts
Definition
permanent account
Term
a trial balance prepared after closing entries have been posted and consisting only of permanent accounts; also referred to as an after-closing trial balance
Definition
post-closing trial balance
Term
accounts whose balances are not carried over from one accounting period to another but instead are closed to the owner's capital account at period-end; revenue, expense, and drawing accounts; also referred to as nominal accounts
Definition
temporary account
Term
a number printed on checks and deposit slips that identifies the bank and the area in which the bank is located as well as other information
Definition
American Bankers Association (ABA) transit number
Term
a nonessential business record that is helpful in maintaining records that are essential
Definition
auxiliary record
Term
an amount of cash on deposit with a bank that the bank must pay at the written order of the depositor
Definition
bank checking account
Term
the process of bringing the cash balance reported on the bank statement into agreement with the balance in the depositor's checkbook; also referred to as reconciling the bank statement
Definition
bank reconciliation
Term
the bank's summary of checking account transactions, usually prepared monthly and mailed to the depositor (or made available online)
Definition
bank statement
Term
an endorsement consisting only of a depositor's signature that allows anyone who possesses a check to cash it
Definition
blank endorsement
Term
a check that has been paid by the bank out of the depositor's account
Definition
canceled check
Term
an amount of cash in the cash register that is more than the amount indicated by the cash sales; recorded in the Cash Short and Over account
Definition
cash overage
Term
an amount of cash in the cash register that is less than the amount indicated by the cash sales; recorded in the Cash Short and Over account
Definition
cash shortage
Term
an account used to bring the Cash account into agreement with the actual amount of cash on hand and can be used by businesses that have many cash transactions and thus often have small amounts of cash over or under what the cash register shows
Definition
Cash Short and Over account
Term
an amount of money that is maintained in the cash register for making change for cash customers; recorded in the Change Fund account
Definition
change fund
Term
an asset account in which the amount of the change fund is recorded
Definition
Change Fund account
Term
a written order directing a bank to pay a specified sum of money to a designated person or business
Definition
check
Term
part of a check that remains in the checkbook as a permanent record of the check; often referred to as a stub
Definition
check stub
Term
a bound book of checks with stubs; the depositor's record of the checking account
Definition
checkbook
Term
a deposit made and appearing in the checkbook but not appearing on the bank statement; also referred to as an outstanding deposit
Definition
deposit in transit
Term
a form that is prepared when coin, currency, or checks are deposited in a bank account indicating the depositor's name and account number and summarizes the amount deposited; also referred to as a deposit ticket
Definition
deposit slip
Term
the business or person under whose name a checking account is opened
Definition
depositor
Term
the bank on which a check is drawn
Definition
drawee
Term
a person or business who writes a check
Definition
drawer
Term
the movement of cash by electronic communication rather than by paper documents (money, checks, money orders, etc.)
Definition
electronic funds transfer (EFT)
Term
a signature or stamp on the back of a check that transfers ownership of the check to the bank or another person
Definition
endorsement
Term
an endorsement using the phrase "Pay to the order of" followed by the name of the business or person to whom the check is being transferred, thus allowing only the specified business or person to cash the check
Definition
full endorsement
Term
the procedures used within a company to protect its assets
Definition
internal control
Term
a check drawn against an account in which there are not sufficient funds; also referred to as an uncollectible, or bad check
Definition
NSF check
Term
a check that was recorded in the checkbook but does not appear on the bank statement because it did not reach the bank's accounting department in time to be included on the statement
Definition
outstanding check
Term
the business or person to whom a check is made payable
Definition
payee
Term
an asset account in which the amount of the petty cash fund is recorded
Definition
Petty Cash account
Term
a small amount of cash kept in the office for making small payments for items such as postage and office supplies; recorded in the Petty Cash account
Definition
petty cash fund
Term
a nonessential business record used to record payments from the petty cash fund and is summarized and used as a basis for a journal entry at the end of the month; a type of auxiliary record
Definition
petty cash payments record
Term
a form showing the amount of the payment, the purpose, and the account to be debited used when payment is made from the petty cash fund
Definition
petty cash voucher
Term
the person designated to disburse money from the petty cash fund; recorded in the Petty Cash account
Definition
petty cashier
Term
a not-for-profit corporation created by the Sarbanes-Oxley Act of 2002 to oversee the auditors of public companies in order to protect the interest of investors and further the public's interest in the preparation of fair and reliable financial reports
Definition
Public Company Accounting Oversight Board (PCAOB)
Term
an endorsement using a phrase "For deposit only," which limits or restricts any further transfer of the check
Definition
restrictive endorsement
Term
an account maintenance fee charged by the bank and deducted directly from the depositor's balance; also referred to as a bank fee
Definition
service charge
Term
a form kept by a bank documenting personal information and the signature of the person(s) authorized to write checks on a bank account
Definition
signature card
Term
the action of replacing the amount paid from the petty cash fund, usually done at the end of the month
Definition
to replenish the petty cash fund
Term
a subsidiary ledger that lists the individual accounts of creditors; also referred to as the creditors' ledger
Definition
accounts payable ledger
Term
a discount offered by a seller to encourage early payment by a buyer; to the seller, referred to as a sales discount; to the buyer, referred to as a purchases discount
Definition
cash discount
Term
a special journal used to record all cash payments, including those made by check; also referred to as the cash disbursements journal
Definition
cash payments journal
Term
an account in the general ledger that summarizes accounts in a related subsidiary ledger
Definition
controlling account
Term
accounts that are presented on the income statement; used to determine the cost of goods sold to customers
Definition
cost accounts
Term
a written statement that indicates a seller's willingness to reduce the amount owed by a buyer
Definition
credit memorandum
Term
the buyer's written request to a seller for credit for a merchandise return or allowance
Definition
debit memorandum
Term
a shipping term that means that the seller is responsible for all freight costs until the goods reach their destination
Definition
FOB (free on board) destination
Term
a shipping term that means that the buyer is responsible for all freight costs while the goods are in transit
Definition
FOB (free on board) shipping point
Term
cost account in which charges for freight on incoming merchandise are recorded; also referred to as Transportation In
Definition
Freight In account
Term
the main ledger; the ledger containing the accounts needed to prepare the financial statements
Definition
general ledger
Term
the bill the seller of goods sends to the buyer of the goods that identifies and describes the goods and how they will be delivered; to the seller, referred to as the sales invoice; to the buyer, referred to as a purchase invoice
Definition
invoice
Term
the price appearing in a price catalog issued by the seller
Definition
list price
Term
goods held for sale to customers; also referred to as merchandise inventory and stock in trade
Definition
merchandise
Term
a business that buys goods from other companies and sells those goods to customers; also referred to as a trading business
Definition
merchandising business
Term
a written or online form sent from a buyer of goods to the seller specifying the quantity and description of the goods to be purchased
Definition
purchase order
Term
a written request for goods to be purchased; usually prepared by a department head or manager and sent to a firm's purchasing department
Definition
purchase requisition
Term
a temporary owner's equity account used to record the cost of merchandise purchased for resale; also referred to as the Merchandise Purchases account or the Purchases of Merchandise account
Definition
Purchases account
Term
a contra purchases account used to record discounts received for prompt payment of merchandise invoices
Definition
Purchases Discounts account
Term
buyer's term for the discounts offered by a seller to encourage early payment
Definition
purchases discount
Term
the buyer's copy of the bill that identifies and describes the sold goods and how they will be delivered
Definition
purchases invoice
Term
a special journal used only to record credit purchases of merchandise; sometimes a multicolumn journal used to record all credit purchases, not just merchandise
Definition
purchases journal
Term
returns of merchandise purchases or price reductions received for damaged or irregular merchandise
Definition
purchases returns and allowances
Term
a contra purchases account used to record returns and allowances on merchandise purchases
Definition
Purchases Returns and Allowances account
Term
a form prepared by a buyer to verify that goods have been received and accepted
Definition
receiving report
Term
a business such as a grocery store, drugstore, and restaurant, that sells directly to consumers
Definition
retail business
Term
a seller's term for the discounts offered to encourage early payment by a buyer
Definition
sales discounts
Term
the seller's copy of the bill that identifies and describes the sold goods and how they will be delivered
Definition
sales invoice
Term
a listing of the individual creditor account balances in the accounts payable ledger
Definition
schedule of accounts payable
Term
a journal used by businesses to record transactions that are similar in nature; examples are the purchases journal and the cash payments journal; also referred to as a special-purpose journal
Definition
special journal
Term
a ledger that contains only one type of account such as the accounts payable ledger
Definition
subsidiary ledger
Term
percentage reductions from the list price of merchandise
Definition
trade discounts
Term
a business that purchases goods in bulk from manufacturers and sells the goods to retailers, other wholesalers, schools and other nonprofit institutions, and, at times, directly to consumers
Definition
wholesalers
Term
an asset account that shows the total dollar amount due from credit customers
Definition
Accounts Receivable account
Term
an asset account used to record the amount due from nonbank credit card sales
Definition
Accounts Receivable-Credit Cards account
Term
a subsidiary ledger containing only accounts of credit customers; also referred to as the customers' ledger
Definition
accounts receivable ledger
Term
a special journal used to record all receipts of cash, regardless of the source
Definition
cash receipts journal
Term
a variation of the sales ticket; the total of the tape serves as the source document for later journal entries
Definition
cash register tape
Term
an expense account that is used to record discounts paid when receipts for credit card sales are deposited with the bank that issued the card (such as VISA or MasterCard) or with the credit card company that issued the card (such as American Express)
Definition
Credit Card Expense account
Term
the amount of time a seller allows a credit customer to pay for a purchase credit period
Definition
credit period
Term
the terms for payment set by a seller of goods or services; includes the amount of time before payment is due and the rate of discount (if any) for paying early
Definition
credit terms
Term
a payment system in which customers pay a percentage of their account plus finance charges on a monthly basis
Definition
revolving charge plan
Term
a revenue account used to record the price of merchandise sold to customers
Definition
Sales account
Term
a contra revenue account with a normal debit balance used to record cash discounts granted to credit customers for prompt payment
Definition
Sales Discounts account
Term
a special journal used only to record credit sales of merchandise
Definition
sales journal
Term
a document prepared when an order is received from a customer
Definition
sales order
Term
a contra revenue account with a normal debit balance used to record returns from and allowances to customers
Definition
Sales Returns and Allowances account
Term
a tax on the retail price of goods sold, collected by the merchant and paid to the governmental body that levies the tax sales tax.mp3
Definition
sales tax
Term
a liability account used to record sales taxes on retail purchases
Definition
Sales Tax Payable account
Term
a form prepared by the seller when a cash sale is made that describes the goods sold, identifies the customer, and serves as a source document for recording the sale; also referred to as the sales slip
Definition
sales ticket
Term
a listing of the balances in the accounts receivable ledger
Definition
schedule of accounts receivable
Term
earnings that are unpaid (and unrecorded) and owed to employees at the end of an accounting period; also referred to as accrued wages
Definition
accrued salaries
Term
the dollar value of merchandise that is on hand at the beginning of an accounting period
Definition
beginning merchandise inventory
Term
the dollar value of merchandise that is on hand at the end of an accounting period ending merchandise.mp3
Definition
ending merchandise inventory
Term
a count taken of the merchandise on hand at the end of an accounting period
Definition
inventory
Term
an asset account that shows the value of goods (inventory) on hand at a given moment (usually at the beginning or end of the accounting period)
Definition
Merchandise Inventory account
Term
a balance sheet that divides the assets and liabilities sections into the following subsections: current assets and plant assets, and current liabilities and long-term liabilities
Definition
classified balance sheet
Term
an income statement divided into the following sections: revenue, cost of goods sold, operating expenses, income from operations, and other income and expenses.
Definition
classified income statement
Term
the cost of merchandise sold to customers during the accounting period; an amount determined by the formula: Beginning Merchandise Inventory + Net Purchases of Merchandise = Cost of Goods Available for Sale - Ending Merchandise Inventory = Cost of Goods Sold
Definition
cost of goods sold
Term
cash and other assets that through normal operations are expected to be sold, converted to cash, used up, or expired usually within one year of the balance sheet date current
Definition
current assets
Term
short-term debt that is due for payment within one year; examples include accounts payable, salaries payable, sales tax payable, and the current portion of notes payable
Definition
current liability
Term
current assets divided by current liabilities; a measure of a company's ability to pay current liabilities from current assets
Definition
current ratio
Term
expenses related to running a firm's office, overall administrative expenses of the business or any other operating activities that do not involve the sale of merchandise; also referred to as administrative expenses
Definition
general expenses
Term
the profit before subtracting the expenses of doing business; calculated by subtracting cost of goods sold from net sales; also referred to as gross margin
Definition
gross profit
Term
gross profit minus operating expenses; also referred to as operating income
Definition
income from operations
Term
financial statements prepared during the fiscal year for periods of less than 12 months such as monthly, quarterly, and semiannually
Definition
interim statements
Term
refers to how quickly an asset can be turned into cash, used up, or expire; used in reference to assets, which are listed on the balance sheet in the order of their liquidity
Definition
liquidity
Term
debt that will not come due for payment within one year; examples include long-term notes payable and mortgages payable
Definition
long-term liability
Term
the amount obtained by subtracting the amount of sales returns and allowances and the amount of sales discounts from the amount of sales
Definition
net sales
Term
the normal and expected expenses of operating a business
Definition
operating expenses
Term
expenses that are not directly associated with the normal operation of the business, such as interest expense
Definition
other expenses
Term
revenue earned that is not directly associated with the normal operation of the business, such as income from vending machine sales and interest earned
Definition
other income
Term
assets that are expected to be used in the business for more than one year; are acquired for use in the operation of a business, are not intended for resale to customers, and are tangible; examples include land, buildings, machinery and equipment, furniture, and automobiles; also referred to as fixed assets; property, plant, and equipment; or long-term assets
Definition
plant assets
Term
a technique that allows the accountant to make the same entry to record the payment of accrued expenses that would have been made had two separate accounting periods not been involved; always recorded on the first day of the new accounting period
Definition
reversing entries
Term
operating expenses directly related to the sale of a firm's merchandise
Definition
selling expenses
Term
a reference to how long an asset will last; an organizing quality of a plant asset for listing on the balance sheet
Definition
stability
Term
current assets minus current liabilities; a measure of a company's ability to meet short-term obligations
Definition
working capital
Term
the addition of columns of figures in different ways to check the accuracy of the totals
Definition
cross-footing
Term
a person who works under the direct control of an employer on a continuing basis
Definition
employee
Term
a record maintained for each employee that contains basic employee information and a summary of payroll data for that employee
Definition
employee's earnings record
Term
a form filled out by each employee showing marital status and number of withholding allowances claimed
Definition
Employee's Withholding Allowance Certificate (Form W-4)
Term
an Internal Revenue Service publication containing federal income withholding tables for various payroll periods for married and single persons
Definition
Employer's Tax Guide (Circular E)
Term
an act passed by Congress in 1938, that as amended, establishes standards for minimum wage, overtime pay, child labor, required payroll record keeping, and equal pay for equal work regardless of sex; also referred to as the Wages and Hours Law
Definition
Fair Labor Standards Act
Term
a liability account used to record the amount of federal income taxes withheld from the earnings of employees; credited when taxes are withheld and debited when the taxes are sent in
Definition
Federal Income Tax Payable account
Term
an act that requires contributions by both the employer and the employee to the federal Social Security system; includes two component parts: OASDI (Old-Age, Survivors, and Disability Insurance) and HI (Hospital Insurance), or Medicare
Definition
Federal Insurance Contributions Act (FICA)
Term
a liability account used to record (1) the amount of HI taxes withheld from employees' earnings and (2) matched by the employer; an account credited when HI taxes are withheld (or imposed on the employer) and debited when the taxes are sent in
Definition
FICA Tax Payable-HI account
Term
a liability account used to record (1) the amount of OASDI taxes withheld from employee earnings and (2) the amount of OASDI taxes matched by the employer; an account credited when OASDI taxes are withheld from employees (and matched by the employer) and debited when the taxes are sent in
Definition
FICA Tax Payable-OASDI account
Term
an employee's earnings before any amount is deducted by the employer
Definition
gross earnings
Term
an individual who works for a fixed hourly rate, usually referred to as a wage
Definition
hourly worker
Term
a person who agrees to complete a specific job or task and determines the ways and methods of achieving that job or task.
Definition
independent contractor
Term
the lowest hourly rate that can be paid to employees who are covered by the Fair Labor Standards Act
Definition
minimum wage
Term
gross earnings minus payroll deductions; also referred to as net pay or take-home pay
Definition
net earnings
Term
the maximum amount of earnings during a calendar year that is subject to OASDI taxes
Definition
OASDI taxable wage base
Term
a minimum of one and one-half times the regular rate of pay for hours worked over 40 in a week; commonly referred to as time-and-a-half
Definition
overtime pay
Term
an amount withheld (deducted) from the pay of an employee
Definition
payroll deduction
Term
a summary of the gross earnings, deductions, and net pay for all employees for a specific payroll period
Definition
payroll register
Term
a method of payment in which workers are paid for each unit they produce, rather than by hours worked piece
Definition
piece-rate plan
Term
an individual who works for a fixed amount of pay for a definite period of time, such as a week, a month, or a year
Definition
salaried employee
Term
an expense account used to record the gross amount of the payroll; also referred to as Wages Expense account, Payroll Expense account, and Salaries and Commissions Expense account
Definition
Salaries Expense account
Term
a fixed amount paid to employees for a certain period of time, such as a week, month, or year
Definition
salary
Term
the common rate for overtime pay
Definition
time-and-a-half
Term
a fixed, hourly rate paid to an employee
Definition
wage
Term
a method that uses government-issued tables to compute the amount of federal income tax to be withheld from employees
Definition
wage bracket method
Term
an amount of earnings that is not subject to taxation; also referred to as an exemption
Definition
withholding allowance
Term
an identifying number each business with employees must have if during any part of the year it employs one or more people; the business's equivalent of an individual's Social Security number
Definition
employer identification number (EIN)
Term
a form that must be filled out when FICA taxes and withheld federal income taxes are deposited in an authorized bank
Definition
Form 8109, Federal Tax Deposit Coupon
Term
an act requiring employers to pay into a fund designed to assist workers who are temporarily unemployed
Definition
Federal Unemployment Tax Act (FUTA)
Term
a form filed by the employer by January 31, summarizing quarterly FUTA deposits made during the preceding year
Definition
Form 940, Employer's Annual Federal Unemployment Tax Return
Term
a quarterly report that summarizes FICA taxes (employer and employee shares) and federal income taxes withheld during the quarter
Definition
Form 941, Employer's Quarterly Federal Tax Return
Term
a form issued by the employer to each employee by January 31 that contains a summary of the employee's earnings and tax deductions for the past year
Definition
Form W-2, Wage and Tax Statement
Term
an annual form employers file with the Social Security Administration to summarize employee earnings and tax deductions; filed with copy A of each employee's Form W-2 Form
Definition
Form W-3, Transmittal of Wage and Tax Statements
Term
a current liability account used to record the employer's obligation for federal unemployment taxes
Definition
FUTA Tax Payable account
Term
a 12-month period ending on June 30 of the prior year; employers look at the amount of FICA taxes (employee and employer shares) and withheld income taxes during the lookback period to determine their deposit status for the current year
Definition
lookback period
Term
a system set up by the states to provide a lower SUTA rate for employers who maintain stable employment
Definition
merit-rating system
Term
an operating expense account used to record the total payroll taxes imposed on the employer
Definition
Payroll Tax Expense account
Term
a law that requires employers to pay unemployment taxes (for the benefit of employees) to the states in which they conduct business
Definition
State Unemployment Tax Act (SUTA)
Term
a current liability account used to record the employer's obligation for state unemployment taxes
Definition
SUTA Tax Payable account
Term
the insurance employers must carry to provide protection for employees who suffer job-related illness or injury; payments recorded in the Worker's Compensation Insurance Expense account
Definition
workers' compensation insurance
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