and transferred to the owner’s capital account, thereby increasing owner’s equity. (At a corporation, the credit balances in the revenue accounts will be closed and transferred to Retained Earnings, which is a...
and transferred to the owner’s capital account, thereby increasing owner’s equity. (At a corporation, the credit balances in the revenue accounts will be closed and transferred to Retained Earnings, which is a...
An entry without debit or credit amounts. For example, assume that a corporation has 100,000 shares of $0.50 par value common stock before a 2-for-1 stock split. At the time of the split a memo entry would be entered in...
stock is the result of a corporation repurchasing its own stock and holding those shares instead of retiring them. In the general ledger there will be an account Treasury Stock with a debit balance. (At the time of the...
is the __________ __________ __________ __________. 12. If a corporation sells one of its plant assets for a cash amount that is less than the asset’s book value, a __________ on the sale of a plant asset will be...
What is the accounting equation? Definition of Accounting Equation The accounting equation of a sole proprietorship is assets = liabilities + owner’s equity. For a corporation, the accounting equation is assets =...
Wrong. Liabilities are not involved in this transaction. No Effect Right! Liabilities are not involved in this transaction. Owner's (or Stockholders') Equity Increase Right! The proprietor's Capital...
This visual tutorial for the topic Income Statement presents the key components and formats used on a corporation's income statement (which is also known as the statement of operations or profit and loss statement)....
mean a corporation’s net income after income tax expense. Many business owners refer to the company’s income statement as the profit and loss statement or the P&L. A company reporting a positive amount of net...
of Full Disclosure Principle The disclosures required under this principle can be found in a number of places, such as: The company’s financial statements including the notes to the financial statements and...
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...
at the price specified in the bond indenture. Mark as wrong Mark as right convertible bond A bond with this feature can be exchanged by the bondholder for a specified number of shares of the corporation’s stock....
and to credit Accumulated Depreciation for $10,000. Depreciation on the Financial Statements Vs. Tax Return The depreciation that we are discussing is the depreciation reported on the financial statements. This...
are closed at the end of the accounting year, the net amount will ultimately end up in a balance sheet equity account such as the proprietor’s capital account or the corporation’s retained earnings account....
account.) The Income Summary is very temporary since it has a zero balance throughout the year until the year-end closing entries are made. Next, the balance resulting from the closing entries will be moved to Retained...
The balance sheet and income statement are connected. Definition of Balance Sheet and Income Statement The balance sheet reflects the accounting equation: Assets = Liabilities + Owner’s (Stockholders’) Equity When a...
its owner (as would be the case with a corporation). However, the sole proprietor may be able to register as a limited liability company in order to limit his or her personal liability. You should seek professional...
that an asset is acquired. Further, the amount recorded will not be increased for inflation or improvements in market value. (An exception is the change in market value of a short-term investment in the capital stock of...
What is the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
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...
What is the amortization of premium on bonds payable? Definition of Amortization of Premium on Bonds Payable The amortization of the premium on bonds payable is the systematic movement of the amount of premium received...
activity can be segregated into time periods of a year, a month, a week, etc. 7. A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which accounting...
What are the limitations of the payback period? Definition of Payback Period The payback period is a common (but not the best) tool for screening a company’s potential investments. It uses the potential investment’s...
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
-time employee, so the company’s December 31 balance sheet must report a current liability of $3,120. Vacation pay is an example of an accrued expense and an accrued liability that is required by the matching...
accounting year will report the same amount of depreciation. The total amount of depreciation over the years of the asset’s useful life will be the asset’s cost minus any expected or assumed salvage value. In the...
What is operating income? Definition of Operating Income Operating income is defined as a corporation’s operating revenues minus its operating expenses. Operating income will be shown as a subtotal on many...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
Why is it necessary to allocate a lump sum payment to individual items? It is necessary to allocate a lump sum payment to individual items in order to record a fair portion of the lump sum in each of the proper general...
will likely see an increase or decrease when a corporation prepares its financial statements at the end of the accounting year? Select... Common Stock Retained Earnings 30. A corporation’s balance sheet and income...
assets, liabilities, and stockholders’ (or owner’s) equity as of the final moment of the accounting period. Mark as wrong Mark as right income statement (or) statement of earnings (or) statement of operations This...
does not give the bondholders any ownership interest semiannual interest payments must be made when due the maturity amount must be paid when the bonds come due the issuer’s interest expense qualifies as an income tax...
depreciation can be used on the tax returns at the same time that straight-line depreciation is used on the company’s financial statements. Example of How and When to Depreciate an Asset Assume that a U.S. corporation...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Receivable Accounts receivable is a current asset account in which a company records the amounts it has a right to collect from customers who received goods or services on credit. Examples of Accounts Payable and...
assume that its cost of goods sold during the year amounted to $140,000. With these assumptions, the retailer’s gross profit calculation is: net sales of $200,000 ($220,000 minus $20,000) minus its cost of goods sold...
will begin each accounting year with a zero balance and will have its balance at the end of the year closed to an equity account such as a corporation’s retained earnings or a proprietor’s capital account....
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.
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
Segments of a business. For example, a corporation may have a consumer division and an industrial division in order to improve its effectiveness in marketing its goods.
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