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What is the purpose of subsidiary ledgers? Author: Harold Averkamp, CPA, MBA Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the...

Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...

The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...

of a successful company contacts an accounting firm for tax advice. Two tax experts have lunch with the owner and inform her how to process transactions so that she will enjoy tax savings of $40,000. The owner was...

Usually involves a company’s customers remitting amounts to a bank account close to the customers in order for the company to have collected funds sooner. For example, a company with its headquarters in the...

dedicated to carrying out those tasks. Examples of Financial Accounting One part of accounting focuses on presenting the financial information in the form of general-purpose financial statements (balance sheet, income...

and products to be accounted for. The weekly payroll would have to be divided between months.) The cost of cattle was the largest cost, but that cost was available for each day, since cattle had to be paid for within 24...

What is financial reporting? Author: Harold Averkamp, CPA, MBA Definition of Financial Reporting Financial reporting includes all of a company’s communication of financial information to people outside of the company....

A statistical tool used to determine the coefficients of the two or more independent variables involved in estimating the amount of the dependent variable. It utilizes the least-squares method for determining the...

Under the accrual method of accounting, this account reports the employer’s expense for the company’s pension plan during the period indicated in the heading on the income statement. Information on pensions...

An income statement account showing the amount of vacation expense earned by employees (by working) during the specified accounting period.

A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...

Usually financial statements refer to the balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholders’ equity. The balance sheet reports information as of...

online. AccountingCoach PRO has truly helped me get through the past two years of accounting classes (prerequisites and now graduate school). The information is written in an easy-to-understand way; I am so grateful! I...

In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...

A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.

Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...

A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....

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...

Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...

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Harold Averkamp

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.

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