A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
Under this method, net income is determined by analyzing the change in owner’s equity. The alternative is the transaction approach in which each transaction is recorded, sorted and stored.
Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
. I believe that the balance sheet approach is also referred to as the capital maintenance approach. Under the balance sheet approach one looks at the change in stockholders’ or owner’s equity to determine the amount...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
See working capital.
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
positive net income causes an increase in the retained earnings, which is part of stockholders’ equity. A net loss will cause a decrease in retained earnings and stockholders’ equity. A sole proprietorship’s net...
What is net working capital? Author: Harold Averkamp, CPA, MBA Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of...
Often this account appears as a line in the retained earnings section of stockholders’ equity (balance sheet) and will show the year-to-date net income. The reason is that some accounting software will not put the...
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
What will cause a change in net working capital? Author: Harold Averkamp, CPA, MBA Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets...
What is the difference between net cash flow and net income? Author: Harold Averkamp, CPA, MBA Definition of Net Cash Flow Net cash flow is the combination of the cash received and the cash disbursed. In other words, it...
The net amount of revenues and gains minus expenses and losses for the current year for the sole proprietorship owned by R. Smith. After the financial statements are prepared for the year, this amount will be transferred...
A corporation’s net income after income taxes minus the dividends pertinent to the preferred shares of stock (if any).
The net amount of revenues and gains minus expenses and losses for the sole proprietorship owned by Matt Jones. After the financial statements are prepared for the year, this amount will be transferred to Matt Jones,...
life, when the repairs and maintenance expenses are high, the depreciation expense will be low. (While this seems logical, companies prefer to delay expenses and enjoy the higher net income in the early years of an...
Can absorption costing cause an increase in net income? Author: Harold Averkamp, CPA, MBA Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must...
Does paying an account payable affect net income? Author: Harold Averkamp, CPA, MBA Definition of Paying Accounts Payable Under the accrual basis of accounting, expenses are recorded when they have occurred, not when...
Does collecting a customer's accounts receivable affect net income? Author: Harold Averkamp, CPA, MBA Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports...
If inventory is understated at the end of the year, what is the effect on net income? Author: Harold Averkamp, CPA, MBA Definition of Inventory is Understated If inventory is understated at the end of the year, it means...
- Balance Sheet Certificate - Income Statement Certificate - Cash Flow Statement Certificate - Working Capital Certificate - Financial Ratios Certificate - Bank Reconciliation Certificate - Payroll Accounting Learn More...
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Certificate - Adjusting Entries Certificate - Financial Statements Certificate - Balance Sheet Certificate - Income Statement Certificate - Cash Flow Statement Certificate - Working Capital Certificate - Financial...
A lease where the lessee/tenant pays not only rent, but also the property taxes, insurance, and maintenance.
labor for a new asset expensed or included in the cost of the asset? What is an accounting period? How does revenue affect the balance sheet? What is the difference between paid-in capital and retained earnings? What is...
amounts for 5 or more consecutive years all expressed in easier to absorb amounts. Example of Trend Analysis Assume you want to see the trend of a service company’s revenues, net income, and number of clients during...
Certificate - Income Statement Certificate - Cash Flow Statement Certificate - Working Capital Certificate - Financial Ratios Certificate - Bank Reconciliation Certificate - Payroll Accounting Learn More Learn More...
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
Financial Statements Balance Sheet Income Statement Cash Flow Statement Working Capital and Liquidity Financial Ratios Bank Reconciliation Payroll Accounting Badges and Points Work towards and earn 30 badges Earn points...
See net realizable value.
The situation where manufacturing service departments provide service to each other. For example, the factory maintenance department provides services to the factory administrative department and the factory...
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
Featured Review
"Been a Bookkeeper for 25+ years and thought I was 'advanced' until I relocated and I had to get another job. Then I realized I did not have a clue! My current job I could not understand how things all tied together. This course was easy to understand and a true life saver! Worth every cent!" - Debbie H.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviewsWe now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: