An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
This loss is not an extraordinary item, since it is not unusual in nature. However, it can appear as a separate line item in the main portion of the income statement. It will be reported at its gross amount (not net of...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
caused by writing checks for more than the amount of money currently on hand.) Expense accounts and loss accounts including Cost of Goods Sold, Wages Expense, Rent Expense, Interest Expense, Loss on Disposal of...
it can be used to pay suppliers, employees, lenders, and others. Monitoring the inventory levels (total amount and individual items) may result in: Reducing the number of units purchased or produced to match lower...
How do I record money received for an insurance claim on inventory loss? Author: Harold Averkamp, CPA, MBA Definition of Money from Insurance Claim for Inventory Loss Let’s assume that a company has insurance on its...
How do you reduce the break-even point? Author: Harold Averkamp, CPA, MBA Definition of Break-even Point The break-even point is the number of units or amount of revenues needed for the company’s income statement to...
would be reported as a positive amount, since reducing inventory has a positive effect on the company’s cash balance.) Additional Information The change in the inventory is reported as an adjustment to the company’s...
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...
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...
is a loss arising from a catastrophe occurring on January 16, 2024. The amounts reported as of December 31, 2023 will not be adjusted since those amounts were correct as of December 31. However, the readers of the...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
the balance in the current asset account Inventory is reduced through a credit to a contra inventory account, which is referred to as a valuation account. The debit in the entry to write down inventory is recorded in an...
for an amount that is less than the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is...
What is inventory shrinkage? Author: Harold Averkamp, CPA, MBA Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor...
account and a real account? How do you calculate the gain or loss when an asset is sold? What are operating expenses? What is materiality? How do you report a write-down in inventory? What is the difference between...
is net working capital? What is burn rate? Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? What is a...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
be distributed with a company’s income statement and balance sheet.] The cash from operating activities almost always begins with the company’s accrual accounting net income or net loss for the accounting period....
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...
Should inventories be reported at their cost or at their selling prices? Author: Harold Averkamp, CPA, MBA Definition of Inventory Cost Inventories are reported at cost, not at selling prices. A retailer’s inventory...
is the difference between financial accounting and management accounting? What is absorption costing? What is the difference between product costs and period costs? What is the difference between an implicit cost and an...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
, or 2) the NRV of $12,000. In this situation, the inventory should be reported on the balance sheet at $12,000, and the income statement should report a loss of $3,000 due to the write-down of inventory. Join PRO to...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
for the asset.) You need to add back the loss that reduced net income on the income statement so that the amount reflects the cash from operating activities. Investing Wrong. The loss must be added back to the net...
assets. The money raised by a company’s liabilities will generally have a lower cost than money raised from stockholders’ equity for the following reasons: Some liabilities such as accounts payable have no interest...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
What is income smoothing? Author: Harold Averkamp, CPA, MBA Definition of Income Smoothing Income smoothing involves reducing the fluctuations in a corporation’s earnings. The reductions in fluctuations can result from...
What is the profit and loss statement? Author: Harold Averkamp, CPA, MBA Definition of Profit and Loss Statement The profit and loss statement, or P&L, is a name sometimes used to describe a company’s income...
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