Monday, November 2, 2009

Accounting Terms (W)

wages

The compensation earned by employees who are paid on an hourly basis. It is common for production workers to earn wages, since they are usually paid via an hourly rate.

wages expense

The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when the wages are reported as an expense.

wages expense - delivery department

Under the accrual method of accounting, this account reports the amount of wages that the delivery employees have earned during the accounting period indicated in the heading of the income statement. Because wages are usually associated with hourly-paid employees, the expense will likely appear on the income prior to the date that the wages are paid. To learn more, see Explanation of Payroll Accounting.

wages expense - warehouse department

Under the accrual method of accounting, this account reports the amount of wages that the warehouse employees have earned during the accounting period indicated in the heading of the income statement. Because wages are usually associated with hourly-paid employees, the expense will likely appear on the income prior to the date that the wages are paid. To learn more, see Explanation of Payroll Accounting.

wages payable

A current liability account that reports the amounts owed to emplyees for hours worked but not yet paid as of the date of the balance sheet.

warranties

A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.

warranty expense

The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order to comply with the matching principle. A related account, Warranty Payable or Warranty Liability is also established at the time of the sale.

warranty liability

A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the time when the expense is reported.) The liability will be reduced by the actual expenditures to repair or replace the product. Warranty Payable or Warranty Liability is considered to be a contingent liability that is both probable and capable of being estimated.

warranty payable

See warranty liability.

weighted-average accumulated expenditures on self-constructed assets

One of the amounts used in determining the amount of interest to be capitalized when a company self-constructs certain long-term assets.

weighted-average cost flow assumption

Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for the year have occurred). The average cost per unit is then applied to the units in inventory and to the units that have been sold.

weighted-average cost of capital

A weighted-average of the cost of a company's debt, common stock, and preferred stock.

weighted-average number of shares of stock outstanding

Used to calculate the earnings per share of common stock: Earnings available for common stock divided by the weighted-average number of shares of common stock outstanding. The weighted-average number of shares is needed when shares of stock have been issued or repurchased within the period of the earnings.

white-collar worker

A term often used when referring to office workers, managers, professionals, and executives. These employees' pay is often stated as a salary for a month (and not as an hourly pay rate).

whole life insurance

Life insurance with a cash value. (As opposed to term insurance, which does not have a cash value.)

withdrawals by owner

Also referred to as draws. These are a reduction of owner's equity, but are not a business expense and they do not appear on the sole proprietorship's income statement.

withholdings

The term associated with payroll deductions from an employees' gross wages or gross salary.

worker compensation insurance

Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for operators of machinery and are lower for office employees. To learn more, see Explanation of Payroll Accounting

worker compensation insurance expense

Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company has paid the insurance premiums within this time period.



The worker compensation insurance expense associated with the selling and administrative functions of the business will appear as on operating expense on the company’s income statement. Worker compensation insurance cost associated with employees in the manufacturing function of the business will be an integral part of the cost of the products manufactured. If all of the products are sold, the worker compensation insurance cost will be included in the cost of the goods that were sold. If some of the products manufactured are in inventory, then some of the worker compensation insurance cost will be included in the cost of the products that are held in inventory.

worker compensation insurance payable

This current liability account reports the amount a company owes as of the balance sheet date for its worker compensation insurance policy premiums. The amounts owed are usually based on the policy’s rates for the various work classifications of the company’s employees.

working capital

Current assets minus current liabilities. To learn more, see Explanation of Financial Ratios.

working capital ratio

See current ratio.

work-in-process inventory

See inventory-work in process.

write-down

To reduce the carrying amount of an asset. For example, inventory is often reduced to the lower of its cost or its market value. A long term asset whose value has been impaired might result in the amount shown on the balance sheet to be reduced to an amount that is lower than its cost.

write-off

To remove or reduce an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.

write-up

To increase a carrying amount. Also see write-up work.

write-up work

The preparation of financial statements from a client's information and without any review or audit of the amounts.

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