Ch. 11 Flashcards
Contingent Liability
A potential liability that depends on some future event.
Gross Pay
The total amount of salary, wages, commissions, and any other employee compensation before taxes and other deductions.
Warranty
An agreement that guarantees a company’s product against defects.
Current Liability
A liability that must be paid with cash, or with goods and services, within one year or within that entity’s operating cycle if the cycle is longer than a year.
Liabilities
Debts that are owed to creditors.
Current Portion of Notes Payable
The amount of the principal that is payable within one year of the balance sheet date.
Income Tax Withholding
Income tax deducted from an employee’s gross pay.
Long Term Liability
A liability that does not need to be paid within one year or within the entity’s operating cycle, whichever is longer.
Payroll Register
A schedule that summarizes the earnings, withholdings, and net pay for each employee.
Pension Plan
A plan that provides benefits to retired employees.
Short Term Note Payable
A written promise made by the business to pay a debt, usually involving interest, within one year or less.
Social Security (FICA) Tax
Federal Insurance Contributions Act (FICA) tax, which is withheld from employees’ pay and matched by the employer.
Unemployment Compensation Taxes
Payroll tax paid by employers to the government, which uses the cash to pay unemployment benefits to people who are out of work.
Federal Insurance Contributions Act (FICA)
The federal act that created the Social Security tax that provides retirement, disability, and medical benefits.
Net Pay
Gross pay minus all deductions. The amount of compensation that the employee actually takes home.
Time Interest Earned Ratio
Evaluates a business’s ability to pay interest expense. ( Net Income + Income Tax Expense + Interest Expense / Interest Expense )
