Accounting Terms (H)

health insurance expense - delivery

Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether or not the company has paid/remitted the insurance premiums within this time period. Since this account involves the delivery function of the business, the health insurance expense should be reported in the operating expense section of the company’s income statement.

health insurance expense - selling & admin

Under the accrual method of accounting, the account Health Insurance Expense - Selling & Admin reports the health insurance expense the company has incurred for the employees in the selling and administrative department of the company during the period indicated in the heading of the income statement, whether or not the company has paid the health insurance costs during this time period.

health insurance expense - warehouse

Under the accrual method of accounting, this account reports the employer's portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether or not the company has paid/remitted the insurance premiums within this time period. Since this account involves the warehouse function of the business, the health insurance expense should be reported in the same section of the company’s income statement as the warehouse salaries and wages are reported.

held-to-maturity securities

Bonds and other debt securities that a company intends to hold until the securities mature. In addition to intent, the company must have the financial ability to be able to hold them until they mature.

high-low method

A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the highest volume of processing items there were 10,000 items processed at a total cost of $35,000 and at the lowest volume there were 6,000 items processed at a total cost of $27,000, the high-low method indicates the variable rate was $2 per unit. ($35,000 – $27,000) divided by (10,000 – 6,000). The fixed amount will be $15,000 [$27,000 – $2(6,000)].

historical cost

The original cost incurred to acquire an asset. (As opposed to replacement cost, current cost, or cost adjusted by a general price index.) If a company purchased land in 1940 for $1,000 and continues to hold that land, the company's balance sheet in the year 2004 will report the land at $1,000 (even if the land is now worth $1 million).

holding gain

A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of $155,000. However, the company cannot record the holding gain on its financial statements because of the cost principle and the revenue recognition principle. On the other hand, if the company sells the land for $175,000 a holding gain of $155,000 will appear on its income statement as the company also records the $175,000 on its balance sheet and removes the land's original cost of $20,000.

holding loss

A loss that occurs by holding an asset. Holding losses might be recorded on the income statement or they might not be recorded depending on the asset and the amounts.

holiday, vacation, sick days expense - delivery

Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the delivery employees have earned during the accounting period indicated in the heading of the income statement. In effect, the company is accruing this expense when the employees are working—by debiting this account and crediting a liability account, such as Holiday, Vacation, Sick Days Payable. When employees take time off with pay for holidays, vacation or sick days, the liability account is debited and this expense account is NOT debited.

Since this account involves the delivery function of the business, this expense should be reported in the same section of the company’s income statement as the delivery salaries and wages are reported.

holiday, vacation, sick days expense - warehouse

Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the warehouse employees have earned during the accounting period indicated in the heading of the income statement. In effect, the company is accruing this expense when the employees are working—by debiting this account and crediting a liability account, such as Holiday, Vacation, Sick Days Payable. When employees take time off with pay for holidays, vacation or sick days, the liability account is debited and this expense account is NOT debited.

Since this account involves the warehouse function of the business, this expense should be reported in the same section of the company’s income statement as the warehouse salaries and wages are reported.

holiday, vacation, sick days payable

This current liability account reports the amount a company’s employees have earned in holiday pay, vacation pay, and sick days but have not yet taken as of the date of the balance sheet.

horizontal analysis

One component of financial statement analysis. This method involves financial statements reporting amounts for several years. The earliest year presented is designated as the base year and the subsequent years are expressed as a percentage of the base year amounts. This allows the analyst to more easily see the trend as all amounts are now a percentage of the base year amounts.

hurdle rate

A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.

illusory profits

phantom profits.