What is Insurance Expense? Insurance expense is the amount that a company pays to get an insurance contract and any additional premium payments. The payment made by the company is listed as an expense for the accounting period. If the insurance is used to cover production and operation, then the insurance expense can be listed…
What is Net Book Value? Net book value (NBV) refers to the historical value of a company’s assets or how the assets are recorded by the accountant. NBV is calculated using the asset’s original cost – how much it cost to acquire the asset – with the depreciation, depletion, or amortization of the asset being…
What is Allocative Efficiency? Allocative efficiency is the level of output where marginal cost is as close as possible to the marginal benefits. It means that the price of the product or service is close to the marginal benefit that one gets from using that product or service. Allocative efficiency occurs when market data is…
What was Black Monday? Black Monday—as it is referenced today—took place on October 19, 1987. On this day, stock markets around the world crashed, though the event didn’t happen all at once. Black Monday saw the biggest one-day percentage drop in U.S. stock market history. The Dow Jones Industrial Average (DJIA) dropped by slightly more than…
What is Accounts Receivable Aging? Accounts receivable aging is a cash management technique used by accountants to evaluate the accounts receivable of a company and identify existing irregularities. The aging method categorizes the receivables based on the length of time an invoice has been due, in order to determine which customers to send to collections…
What is Pretax Income? Pretax income, also known as earnings before tax or pretax earnings, is the net income earned by a business before taxes are subtracted/accounted for. Pretax income, however, accounts for deductions related to operating expenses, depreciation, and interest expenses. Formula for Pretax Income The formula for calculating pretax income is as follows:…
What is Franking Credit? Also known as imputation credit, franking credit is a type of tax credit that enables a company to pass on the tax paid at the corporate level to its shareholders. The idea behind the tax credit is to help avoid double taxation of dividends. Alternatively, shareholders can receive franking credits as…
What is Utilities Expense? Utilities expense is the cost incurred by using utilities such as electricity, water, waste disposal, heating, and sewage. The expenses are incurred over the course of the reporting period, calculated, and accrued for, or payment is rendered. With the accrual basis of accounting, the total amount recorded as utilities expense reflects…
What is Enterprise Resource Planning (ERP)? Enterprise resource planning – more commonly referred to as ERP – is a software system used to manage and maintain the functions of a business. The tasks are typically done in real-time. Components of ERP Software ERP programs are commonly known as business management software. They involve a host…
What is Sales per Square Foot? Sales per square foot is a metric commonly used by retail companies to determine the amount of revenue generated per square foot of retail space. Sales per square foot can be used to determine the sales efficiency of retail stores. Formula for Sales per Square Foot Where: Revenues refer…
