) and expenses and losses when they occur (not when money is paid out). The cash flow statement concludes by showing that its amounts agree to the change in the company’s cash and cash equivalents from the beginning to...
) and expenses and losses when they occur (not when money is paid out). The cash flow statement concludes by showing that its amounts agree to the change in the company’s cash and cash equivalents from the beginning to...
the following expenses: selling, general, administrative, interest, and income tax. Definition of Gross Profit Margin Gross profit margin is also referred to as the gross profit percentage or gross margin ratio. In that...
include an additional amount that is added to the retailer’s cost of the product. This additional amount must be sufficient to cover the retailer’s selling, general and administrative expenses and some profit....
and credit side, or left and right side, the balance in a general ledger account will be either a debit balance or a credit balance. Within the general ledger, these accounts are expected to have debit balances: assets,...
owner’s equity increases. When the company pays cash for an advertisement expense, its assets decrease and its owner’s equity decreases. In accounting and bookkeeping there is a separate financial statement known as...
of $250, but the bill will be paid 10 days later. Since owner’s equity is reduced by expenses (and is increased by revenues), the bookkeeping equation will show the following: Assets of $900 = Liabilities of $250 +...
and an industrial division to more effectively market the company’s products. Each division’s manager is responsible for sales and expenses. However, if the company’s executive team makes all of the investment...
at its cost of $15,000 Report the inventory at its net realizable value (NRV) of $12,000. (NRV is equal to the estimated sales value of $14,000 minus $2,000 of expenses necessary to get the goods sold for $14,000.) The...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
be the case under the allowance method. [The Internal Revenue Service requires the direct write off method in order to prevent taxpayers from claiming a bad debts expenses based on an anticipated potential loss.] Join...
or simply the gross margin.) Companies should be continuously monitoring its gross margin ratio to be certain it is sufficient to cover its selling, general and administrative expenses, interest expense, and to earn a...
operating businesses each of which is responsible for its revenues and expenses. However, investment decisions for the operating businesses remain centralized. That is, the corporation’s executive officers decide...
. As of November 30 none of the $2,400 cost has expired and the entire $2,400 will be reported on the balance sheet as Prepaid Insurance or Prepaid Expenses. On December 31, an adjusting entry will debit Insurance...
and Over provides a way to monitor employees’ cash handling proficiency. Generally, the amounts in the account Cash Short and Over are so small that the account balance will be included with other insignificant...
on its investments. The investment interest and dividend amounts earned will be reported on the income statement as other income. To provide more clarity, accountants use the term net income to describe the amount...
and general management, are expenses of the accounting period and are not applied or assigned to products.) Actual overhead are the manufacturing costs other than direct materials and direct labor. Since the overhead...
statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
statements to the earlier financial statements of the same company Compare a company’s financial statements to those of other companies (especially within the same industry) Understand how a company...
, if supplies expense was budgeted to be $30,000 but the actual supplies expense ends up being $28,000, the $2,000 variance is favorable because having fewer expenses than were budgeted was good for the company’s...
manufacturing costs. In addition, there are selling, general and administrative expenses that are even more difficult to associate with individual products. A more compelling reason that selling prices should not be...
What is the difference between a budget and a standard? Definition of a Budget In business and other organizations, a budget often refers to a department’s or a company’s projected revenues, costs, or expenses....
as prepaid expenses. As the prepaid amount expires, the balance in Prepaid Insurance is reduced by a credit to Prepaid Insurance and a debit to Insurance Expense. This is done with an adjusting entry at the end of each...
revenues with a limited amount of expenses. In short, the financial statements provide only some of the information needed when attempting to determine the value of a business. Join PRO to Track Progress Mark the...
prices based on their costs. In the long run, the products’ selling prices must be large enough to cover all of a company’s manufacturing costs (including the variable and fixed indirect manufacturing costs) plus...
statements. I reported on the impact on the company’s expenses in great detail. I thought I was done until the controller drew two T-accounts on a piece of paper and noted my comments in the expense T-account, and...
and expenses under the accrual basis of accounting). A company’s significant cash flows are reported in the statement of cash flows, which is organized as follows: Cash flows from operating activities Cash flows from...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
to the next accounting year, a nominal account is also referred to as a temporary account. Examples of Nominal Accounts The nominal accounts are almost always the income statement accounts such as the accounts for...
. This is needed because the accrual basis of accounting requires the income statement to show the revenues that were earned (not the money actually received) and the expenses incurred or matched to the accounting period...
What are semivariable costs? Definition of Semivariable Costs Semivariable costs are costs or expenses whose behavior is partially fixed and partially variable. That is, part of the total cost does not increase or...
If repairs expense was budgeted to be $50,000 but the actual repairs expense ends up being $63,000, the $13,000 variance is unfavorable because having more actual expenses than were budgeted was not good for the...
be reported. The negative net income occurs when the current year’s revenues are less than the current year’s expenses. If the cumulative earnings minus the cumulative dividends declared result in a negative...
, the $850 of revenues minus the related expenses results in the amount of net income. Effect from Collecting an Account Receivable Assume that on January 8, HRS receives the $850 from the customer whose furnace was...
, sheltered) because the loss was also deductible on the company’s income tax return. net income. Revenues and gains minus expenses and losses. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
the detailed information on revenues and expenses that would be available under the transaction approach. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper. (Examples include interest on bank loans since the last loan payment, wages earned by...
will include preparing the following projections for the next accounting year: Amounts for sales Amounts for producing goods Amounts for each department’s expenses Summarizing the above budgets into a master budget or...
, and prepaid expenses. Evaluating Liquidity Liquidity depends on 1) the speed at which the assets should be turning to cash, or 2) the assets’ nearness to cash. For example, some temporary investments are marketable...
, the entry to record the stock dividend will be a debit of $250,000 to Retained Earnings and a credit to a paid-in capital account such as Common Stock. It is important to note that dividends are not expenses and...
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