A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
is not relevant. The revenue recognition principle prohibits a company from showing a gain from merely holding a plant asset. What would you credit if you increased the plant asset amount? Those four accounting...
A loss that occurs by holding an asset. Holding losses might be recorded on the income statement or they might not be recorded depending on the asset and the amounts.
See inventory carrying costs.
A loss from holding an asset and the loss has not yet been reported in the financial statements.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
The amount by which the proceeds from the sale of an automobile used in the business exceeded its carrying amount at the time it is sold.
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
The amount by which the proceeds from the sale of land exceeded the carrying amount of the land sold. It is reported as a non-operating or “other” item on a multiple-step income statement.
A non-operating item that results from the sale of a long-term asset at an amount greater than the carrying amount (book value) of the truck at the time it is sold.
The amount by which the proceeds from the sale of equipment (that had been used in the business) exceeded its carrying amount at the time it is sold.
See contingent gain.
The amount by which the proceeds from the sale of investments exceeded the carrying amount of the investments that were sold. It is reported as a non-operating or “other” item on a multiple-step income...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
A non-operating item that results from the sale of a long-term asset for more (gain) or less (loss) than its carrying amount or book value.
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
What are gains? Definition of Gains In financial accounting, gains often pertain to some of a company’s transactions which occur outside of the company’s main business activities. Transactions which are outside of a...
How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that...
This is the classification shown on a single-step income statement which reports the operating revenues, nonoperating revenues, and gains in one section of the income statement. Revenues and gains enhance the...
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
A temporary holding place for amounts that need further analysis.
and less asset amount (or more liability amount). If there is uncertainty as to whether there was a gain, the rule says don’t record it. Because of the uncertainty and because you did not record the potential gain,...
What is a contingent asset? Definition of Contingent Asset A contingent asset is a potential asset that is associated with a potential gain. The asset and gain are contingent because they are dependent upon some future...
A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the...
of Gain on Sale of Long-term Assets When a company sells one of its long-term assets and the amount of the proceeds is greater than the book value or carrying value of the long-term asset at the time of the sale, the...
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
supplier is unable to deliver additional units at the expected time. If the company is a manufacturer, a safety stock of materials could minimize the risk of production being disrupted. Of course there are additional...
statements Being eligible for a U.S. income tax benefit Having less inventory holding costs Being confronted with the total cost of holding items in inventory Join PRO to Track Progress Mark the Question as Read...
Featured Review
"I have been employed as a bookkeeper and office accounts manager in several small businesses over the years, and am currently a freelance bookkeeper. I first came across AccountingCoach while searching online for answers to queries that came up in the course of my work. Every search led me to AccountingCoach, where I consistently found concise, easy-to-understand answers. Recognizing the reliability of AccountingCoach, I made it my first click in search results, saving valuable time. I became a PRO user to further enhance my bookkeeping skills and broaden my understanding of accounting practices. The comprehensive and well-organized materials offered by AccountingCoach can be followed systematically or explored by specific topics. This resource has proven invaluable, providing insights beyond the scope of my formal bookkeeping qualification." - Yvette F.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: