Chapter 10

Bonus

Compensation to management and other personnel, based on factors such as increased sales or the amount of net income.

Current liabilities

Obligations that a company expects to pay within one year or the operating cycle, whichever is longer.

Current ratio

A measure of a company’s liquidity; computed as current assets divided by current liabilities.

Employee payroll deductions

Deductions from gross earnings to determine the amount of a paycheck.

Employer payroll taxes

Social Security taxes owed by employers.

Gross earnings

Total compensation earned by an employee.

Net pay

Gross pay less payroll deductions.

Notes payable

Obligations in the form of written notes.

Provision

Liability of uncertain timing or amount.

Social Security (Social Welfare) taxes

Taxes assessed on employees and employers by the government to fund social costs.

Working capital

A measure of a company’s liquidity; computed as cur-

rent assets minus current liabilities.

Accounts payable

Obligations to pay suppliers for the delivery of goods and services

Accrued expenses

Expenses incurred, but not yet paid