payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
divided by the interest expense of $150,000). Since the interest coverage ratio is based on the net income under the accrual method of accounting, we recommend that you also review the corporation’s cash provided by...
cash inflows and cash outflows during the same period as the company’s income statement. The cash flow statement is important because the income statement reflects the accrual method of accounting. This means the...
Calculation Assume that a company’s beginning inventory was $100 and its ending inventory was $110, which is an increase of 10. Let’s assume that a company purchased $1,000 of goods during the accounting period. A...
Why is income received in advance a liability? Definition of Income Received in Advance Under the accrual method of accounting, when a company receives money from a customer prior to earning it, the company will have to...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
are earned under the accrual basis or method of accounting. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
.) The profit and loss statement’s period of time could be a year, a year-to-date period such as nine months, a quarter of a year, one month, four weeks, 52 weeks, etc. Under the accrual basis (or method) of accounting...
What is purchase discounts lost? Definition of Purchase Discounts Lost The account Purchase Discounts Lost is a general ledger account used by a company that records vendors’ invoices using the net method. A debit...
What is an expense? Definition of Expense Under the accrual method of accounting, an expense is a cost that is reported on the income statement for the period in which: The cost best matches the related revenues The cost...
bills and notes and uses the accrual method of accounting. The company will report interest income during the accounting periods when the interest is earned. Typically this is done through adjusting entries which debit...
period in order to report the amount of its ending inventory for its balance sheet and the cost of goods sold for its income statement. Computing the Inventory Amount Under the Periodic Inventory Method At the end of an...
. Under the accrual method of accounting, both the borrower and the lender must report any accrued interest as of each balance sheet date. The maker/borrower of the note will report interest expense and interest...
. As with liability accounts, the normal balance will be a credit balance. Under the accrual method of accounting, the accounts such as Unearned Revenues are necessary when a company receives money from a customer in...
Adjusting Entries Why Adjusting Entries Are Necessary Adjusting entries are required at the end of each accounting period so that a company’s financial statements reflect the accrual method of accounting. Without...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
. Mark as wrong Mark as right high-low method This simple, linear technique for determining the amount of total fixed costs and the variable cost rate for mixed costs uses only two points of data. high-low method This...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
by $3,000 and the owner’s equity decreases by $3,000. Again, the accounting equation remains in balance. Revenues Increase Owner’s Equity and Usually Assets Owner’s equity also increases when a company earns...
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...
on the balance sheet under the major classification __________. 26. Accrued expenses are reported on the balance sheet under the major classification known as __________. 27. A more accurate representation of a...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
of __________ __________ by the __________ amount of inventory during the year. 9. One method for estimating the ending inventory is the __________ profit method. 10. JIT is the acronym for __________– __________ –...
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...
cost. 5. The inventory system that does NOT update the Inventory account automatically at the time of each purchase or sales is the _______________ method/system. Periodic Right! Under the periodic method the...
What is process costing? Definition of Process Costing Process costing is a term used in cost accounting to describe one method for collecting and assigning manufacturing costs to the units produced. A processing cost...
of the purchases were added to inventory. (This is an alternative to the method used in introductory accounting textbooks, which is: beginning inventory of $100,000 + net purchases of $300,000 = $400,000 of cost of...
When do you put parentheses ( ) around a number? Definition of Amounts in Parentheses Parentheses around a number could have a variety of meanings. For example, parentheses could indicate any of the following: A negative...
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is the statement of stockholders' equity? Definition of the Statement of Stockholders’ Equity The statement of stockholders’ equity (also known as the statement of shareholders’ equity, statement of equity,...
Are retained earnings an asset? Definition of Retained Earnings Usually, retained earnings consists of a corporation’s earnings since the corporation was formed minus the amount that was distributed to the stockholders...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
Is a prepaid expense recorded initially as an expense? Definition of Prepaid Expense A prepaid expense refers to an amount that a company has paid and a portion or all of it will be an expense in a later accounting...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
What is the segregation of duties? Definition of Segregation of Duties The segregation of duties involves dividing a task so that more than one person is involve in the company’s transactions. By segregating duties, it...
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
What is gross profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Gross profit is sometimes referred to as gross margin. (However, gross margin can also mean the gross...
What is the difference between a trial balance and a balance sheet? Definition of Trial Balance A trial balance is an internal report that remains in the accounting department. The trial balance lists all of the accounts...
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