salaries expense
Under the accrual method of accounting, the account Salaries Expense reports the salaries that employees have earned during the period indicated in the heading of the income statement, whether or not the company has yet paid the employees. Salaries Expense will usually be an operating expense (as opposed to a nonoperating expense). Depending on the function performed by the salaried employee, Salaries Expense could be classified as an administrative expense or as a selling expense. If the employee was part of the manufacturing process, the salary would end up being part of the cost of the products that were manufactured.
salaries expense - delivery department
Under the accrual method of accounting, the account Salaries Expense - Delivery Dept reports the salaries that the employees in the delivery department have earned during the period indicated in the heading of the income statement, whether or not the company has paid the employees during this time period.
salaries expense - selling & admin department
Under the accrual method of accounting, the account Salaries Expense - Selling & Admin Dept reports the salaries that the employees in the selling and administrative department of the company have earned during the period indicated in the heading of the income statement, whether or not the company has paid the employees during this time period.
salaries payable
The current liability account which reports the amount of salaries earned by a company's employees, but which have not yet been paid by the company.
salary
The compensation usually associated with executives, managers, professionals, office employees, etc. whose pay is stated on an annual or on a monthly basis. (On the other hand, "wages" is usually associated with employees whose pay is stated on an hourly basis.) To learn more, see Explanation of Payroll Accounting.
salary and fringes
A phrase used to communicate the total compensation of a salaried employee. Fringe benefits (health insurance, vacation days, sick days, employer matching of social security and medicare taxes, pension or 401-k contributions, etc.) are often a significant percentage of a person's salary.
sales
A revenue account that reports the sales of merchandise. Sales are reported in the accounting period in which title to the merchandise was transferred from the seller to the buyer.
sales allowances
An allowance granted to customers who had purchased merchandise. If the customers are given credit terms, a sales allowance will involve a debit to Sales Allowances and a credit to Accounts Receivable. A sales allowance might be granted because of a pricing error, an error in shipping, etc. and the merchandise is not returned to the seller.
sales commissions expense
An operating expense account shown on the income statement that matches this selling expense to the related sales. Because the goal is to match the expense with the related revenues in the same accounting period, the date that the payment of commissions occurs is not relevant.
sales discounts
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of "1/10, n/30" indicates that the buyer can deduct 1% of the amount owed if the customer pays the amount owed within 10 days. As a contra revenue account, sales discount will have a debit balance and is subtracted from sales (along with sales returns and allowances) to arrive at net sales.
sales journal
A special or specialized journal to record sales of merchandise to customers. In a manual system this saves a significant amount of recording time. In today's computerized environment, sales are recorded automatically when the sales invoice is generated.
sales returns
Merchandise that was returned to the seller by a customer. This account is a contra sales account. When merchandise sold on credit is returned, this account is debited and Accounts Receivable is credited.
sales returns and allowances
A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise. This of course will reduce the seller's accounts receivable and is subtracted from sales (along with sales discounts) to arrive at net sales.
sales revenues
See sales.
salvage value of fixed assets
The estimated scrap value at the end of the useful life of an asset used in the business. It is also referred to as residual value.
SCF
Statement of Cash Flows. To learn more, see Explanation of Cash Flow Statement.
SEC
See Securities and Exchange Commission.
secondary activities
Also referred to as peripheral activities. A company's activities outside of its main activities of buying/producing and selling. Examples include a retailer's financing function involving interest revenue and interest expense, disposal of long term assets used in the business, lawsuit settlements, renting out unused space, etc.
secured bond
A bond with collateral.
secured creditor
A lender such as a bank who has placed a lien on a borrower's assets. As a result, the lender has collateral until the loan amount is repaid.
Securities and Exchange Commission
Usually referred to as the SEC. The U. S. government agency which has regulatory power over the U. S. stock exchanges and the reporting requirements of the corporations whose stock is traded on those stock exchanges. The SEC has delegated much of the accounting rules and standards setting to the Financial Accounting Standards Board, a non-government organization.
self insurance
No insurance. If a company chooses to self insure for fire damage, it does not have insurance for fire damage. Companies with a chain of stores in various cities may decide not to have insurance, since their risk is spread over many stores in many locations.
selling and administrative expense
Also referred to as operating expenses. These expenses are reported in the period in which they were incurred, not the period in which they were paid.
selling expenses
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of the sales offices, salaries and fringe benefits of sales personnel, utilities and telephone usage in the sales department, etc.
Under the accrual basis of accounting, selling expenses appear on the income statement in the period in which they occurred (not the period in which they were paid).
selling, general and administrative expenses
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.) These expenses are not considered to be product costs and are not allocated to items in inventory or to cost of goods sold. Instead these expenses are reported on the income statement of the period in which they occur. These expenses are sometimes referred to as operating expenses.
semi-variable costs
Occurring twice per month. For example, if salaried personnel are paid on the 15th and the last day of the month, we would say they are paid semimonthly. People paid semimonthly will receive 24 paychecks during a year. (People paid every two weeks - such as every other Thursday – are said to be paid biweekly and will receive 26 paychecks during the year.)
semi-variable costs
See mixed expenses.
semi-variable expenses
See mixed expenses.
serial bond
A bond issued with a series (or staggering) of maturity dates.
service charge revenues
A revenue account in a bank's general ledger that indicates the amounts earned by the bank by servicing its customers' accounts at the bank.
service department
See production service department.
service mark
A trademark associated with a service rather than a product.
service revenues
Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed whether or not it was billed. Service Revenues is an operating revenue account and will appear at the beginning of the company's income statement.
setup cost
The cost associated with setting up a piece of production equipment. This would include the cost of the setup mechanic, the cost of scheduling, record keeping, moving the starting material, and testing the first few units of output to be certain the equipment is set up properly.
setup time
The time required to set up a piece of production equipment.
SFAS
See Statement of Financial Accounting Standard.
SG&A
See selling, general and administrative expenses.
shareholder
See stockholder.
shareholders' equity
See stockholders' equity.
short-term asset
See current asset.
short-term liability
See current liability.
simple journal entry
An accounting entry with only one account being debited and only one account being credited.
simple regression
Regression analysis with only one independent variable.
single-step income statement
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined expenses from the combined revenues. An alternative format is the multiple-step income statement.
sinking fund
See bond sinking fund.
Social Security taxes
One component of the payroll tax referred to as FICA. (The other component of the FICA tax is the Medicare tax.) The Social Security tax is levied by the U.S. government on both the employee and the employer. In 2006 the Social Security portion of FICA (excluding Medicare) to be withheld from the first $94,200 of each employee’s annual salary or wages is 6.2%. The employer is required to match that withholding and thus remit 14.4% of the first $94,200 of each employee’s salary or wages. (Medicare taxes are an additional 1.45% for both the employee and the employer on every dollar of salary and wages—for a FICA rate of 7.65% on the first $94,200 of each employee’s annual salary and wages and 6.2% on amounts in excess of $94,200.) To learn more, see Explanation of Payroll Accounting
sold
Transfer of an asset's title from seller to buyer for a stated amount. The transer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms are FOB destination), or at some other agreed upon terms.
sole proprietorship
A simple form of business where there is one owner. Legally the owner and the sole proprietorship are the same. However, for accounting purposes the economic entity assumption results in the sole proprietorship's business transactions being accounted for separately from the owner's personal transactions.
special journals
Journals other than the general journal. Special or specialized journals include the cash receipts journal, the cash disbursements journal, the purchases journal, and the sales journal.
spending variance
See variable manufacturing overhead spending variance and fixed manufacturing overhead budget variance. To learn more, see Explanation of Standard Costs & Variances.
split-off point
The point at which several products emerge from a common process.
spoilage
Waste, scrap, evaporation, etc. in the manufacturing of products. Normal spoilage is considered unavoidable and is part of the cost of producing the good output. Abnormal spoilage is considered avoidable and is not part of the cost of producing good output. The cost of abnormal spoilage should be expensed when it occurs.
spot price
The current price for a commodity or other item to be delivered immediately.
stage 1 allocation
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity "setup costs" is a stage 1 allocation. This stage 1 cost is then allocated to cost objects such as a product or service. See stage 2 allocation.
stage 2 allocation
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
standard cost
The planned or expected costs. Often used in manufacturing for accounting for inventories and production. When actual costs differ from the standard costs, variances are reported. To learn more, see Explanation of Standard Costs & Variances.
standard cost per unit of input
The cost that a pound of material should have cost. The cost that should have been paid for one hour of direct labor.
standard cost system
To learn more, see Explanation of Standard Costs & Variances.
standard cost variances
To learn more, see Explanation of Standard Costs & Variances.
standard cost per unit of product
What the cost of a finished product should have cost.
state income tax withholdings payable
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.
state unemployment tax
Taxes assessed by states to cover unemployment benefits paid to unemployed workers who have been laid off or terminated by a company for specified reasons. This tax is paid by the employer but is computed by multiplying a percentage times the first $7,000 (can vary by state) of each employee's annual wages. To learn more, see Explanation of Payroll Accounting.
statement of cash flows
One of the main financial statements (along with the income statement and balance sheet). The statement of cash flows reports the sources and uses of cash by operating activities, investing activities, financing activities, and certain supplemental information for the period specified in the heading of the statement. To learn more, see Explanation of Cash Flow Statement.
statement of financial accounting standards
The title of the official pronouncement of the Financial Accounting Standards Board which establishes a new accounting standard.
statement of financial position
See balance sheet. To learn more, see Explanation of Balance Sheet.
statement of income
See income statement. To learn more, see Explanation of Income Statement.
statement of operations
See income statement. To learn more, see Explanation of Income Statement.
statement of retained earnings
A statement that shows the changes in retained earnings from one point to another.
statement of stockholders' equity
A financial statement that shows all of the changes to the various stockholders' equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of comprehensive income not reported on the income statement.
static budget
A budget that does not flex for changes in volume or activity.
stock dividend
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each shareholder's percentage of ownership is unchanged. In theory the market value per share should drop since there are now 5% more shares outstanding and the company is exactly the same as before the stock dividend.
stockholder
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and those corporations will have both common stockholders and preferred stockholders.
stockholders' equity
Also referred to as shareholders' equity. At a corporation it is the residual or difference of assets minus liabilities.
stock certificate
Paper evidence of ownernship in a corporation. The certificate would indicate the type of stock (common, preferred), any restrictions pertaining to the sale of the stock, the number of shares, the par value, etc. Today, the larger corporations with many shareholders are likely to use electronic records instead of issuing the paper stock certificates.
stock option
A right to buy a specific number of shares of stock at a specific price by a specific date.
stock split
A stock split, such as a 2-for-1, means that every stockholder will have twice as many shares as was held previously. Accordingly, the market price per share after the split should be one-half of the market price existing prior to the stock split. The main reason for a stock split is to reduce the market price per share of stock.
stop payment order
A directive to a company's bank to not honor (pay) a specific check that the company had written. The company making the request will be charged a fee by the bank for this service.
stores
A part of a manufacturer's inventory that includes direct and indirect materials. Also see inventory-materials.
straight-line method of amortization
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then each year 1/10 of the original amount of discount will be debited to Bond Interest Expense and credited to Discount on Bonds Payable. If the amount of discount is significant, the effective interest rate method of amortization should be used.
straight-line method of depreciation
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of depreciation.
subsidiary ledger
A record of the details to support a general ledger account. The general ledger account is often referred to as the control account. For example, the accounts receivable subsidiary ledger provides the details to support the balance in the general ledger control account Accounts Receivable.
sum-of-the-years' digits (SYD) method of depreciation
A form of accelerated depreciation which means that in the early years of an asset's life there is more depreciation expense than under the straight line method. However, in the later years of the asset's life there will be less depreciation than the straight line method. See Explanation of Depreciation for an illustration and a further discussion.
sunk cost
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
supplies
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account.
A related account is Supplies Expense, which appears on the income statement. The amount in the Supplies Expense account reports the amounts of supplies that were used during the time interval indicated in the heading of the income statement.
supplies expense
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand (unused) at the balance sheet date are reported in the current asset account Supplies or Supplies on Hand.
supplies on hand
See Supplies.
surrender value
See cash surrender value.
suspense account
A temporary holding place for amounts that need further analysis.
SYD depreciation method
sum-of-the-years' digits method of depreciation.
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