What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
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...
in which it is incurred. Hence, interest expense is one of the subtractions from a company’s revenues in calculating a company’s net income. Example of Interest Expense on the Cash Flow Statement Since most...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
ledger account Sales Discounts is a contra revenue account. Sales discounts are not reported as an expense. Example of Sales Discounts A company offers its business customer sales discounts of 1/10, net 30. For the...
What is comprehensive income? Definition of Comprehensive Income Comprehensive income for a corporation is the combination of the following amounts which occurred during a specified period of time such as a year,...
Income Statement Income Statement The income statement is also known as the statement of income, statement of operations, statement of earnings, profit and loss statement, and P&L. It reports a corporation’s...
or number of units sold. The company responsible for paying the sales commissions will report a selling expense. It will also report a liability for any unpaid commissions. The company or person that did the selling...
to be recorded.) Example of a Bank Recording a Loan to a Customer The double entry to be recorded by the bank is: 1) a debit to the bank’s current asset account Loans to Customers or Loans Receivable for the principal...
months later, the utility will record the purchase of only the coal that has arrived and the related account payable. Likewise, on the day the contract is signed, the coal company does not have a sale of the coal...
that the amount will be collected, the landlord should report: Rent Revenue (or Rental Income) during the period of time that the space was occupied but the rent was not received from the tenant, and A current asset...
to a customer who is located 2,000 miles away. The merchandise arrives at the customer’s location on January 2. Between December 30 and January 2, the merchandise is an example of goods in transit. If the terms are...
with accrual adjusting entries by the borrower and the lender before issuing their financial statements. The borrower’s adjusting entry will debit Interest Expense and credit Accrued Interest Payable (a current...
Our visual tutorial for the topic Debits and Credits contains valuable tips for gaining a more complete understanding of when to debit and/or credit accounts. Many sample transactions are presented and each will...
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...
, revenue is the amount earned from customers and clients before subtracting the company’s expenses. Revenue vs Net Income While revenue is the top line on a company’s income statement, net income is often referred...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
What is the gross margin ratio? Definition of Gross Margin Ratio The gross margin ratio is a percentage resulting from dividing the amount of a company’s gross profit by the amount of its net sales. (The gross margin...
in the total amount of a corporation’s stockholders’ equity: Positive net earnings or net income reported on the corporation’s income statement. Some positive Other Comprehensive Income items occurred but they are...
What is a liability account? Definition of Liability Account A liability account is a general ledger account in which a company records the following which resulted from business transactions: Amounts owed to suppliers...
accounts to a balance sheet account such as a corporation’s Retained Earnings account When recording a reversing entry for a previous accrual adjusting entry involving an expense When recording a deferral adjusting...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
What is the accounting cycle? Definition of Accounting Cycle The accounting cycle is often described as a process that includes the following steps: Identifying, collecting and analyzing documents and transactions...
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
for one of its customers. Periodicity allows the manufacturer to divide the manufacturing costs of the machine into the 24 monthly periods covered by the contract. Periodicity also allows the manufacturer to report the...
and benefits earned by the hourly paid employees (which are not yet paid or recorded in the general ledger accounts) as of the last day of each month. You can see more details including journal entries at our free...
A liability account with a debit balance. Discount on Bonds Payable is a contra account associated with the liability account Bonds Payable.
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
See accounting equation.
The standards, rules, guidelines, and industry-specific requirements for financial reporting. To learn more about accounting principles, see our Accounting Principles Outline.
A temporary holding place for amounts that need further analysis.
is used to break a tie between two acceptable choices of how to account for something. It is also associated with recognizing losses but not gains for certain situations. Economic Entity Wrong. The economic entity...
What is an outside accountant? A company’s outside accountant is an accountant who is not an employee of the company. An outside accountant could be a sole practitioner or a member of a firm that provides accounting...
What is principles of accounting? Three meanings come to mind when you ask about principles of accounting… Principles of accounting was often the title of the introductory course in accounting. It was also common for...
with recently deposited checks from customers, the money in a checking account is available on demand. (This is why banks refer to the amounts in their customers’ checking accounts as demand deposits.) The balances in...
in order to replace the units sold. The use of historical costs during periods of increasing prices means that companies with large amounts of plant assets and inventory will be reporting net income that is greater than...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
Accounting Principles (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (18) Marked Wrong (0) Marked Right (0) accounting principles This term refers to the basic underlying accounting...
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