is a debit balance. In other words, the corporation has a negative amount of retained earnings. Example of Deficit Within Stockholders’ Equity Assume a corporation was formed just over three years ago. In its first...
is a debit balance. In other words, the corporation has a negative amount of retained earnings. Example of Deficit Within Stockholders’ Equity Assume a corporation was formed just over three years ago. In its first...
2001, the Financial Accounting Standards Board issued its Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which ended the automatic amortization of goodwill to expense on the...
to the government. In other words, the employer is acting as an agent by withholding and remitting the employees’ money. Examples of Payroll Withholding Taxes The payroll taxes withheld from employees include federal...
What is absorption costing? Definition of Absorption Costing Absorption costing (also known as full absorption costing) indicates that all of the manufacturing costs have been assigned to (absorbed by) the units of goods...
of 10 years for its financial statements, while using a useful life of 7 years for its income tax return. Even the depreciation for a company’s financial statements could consist of some assets being depreciated...
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
will include vehicle loans, bonds payable, capital lease obligations, pension and other post-retirement benefit obligations, and deferred income taxes. Some long-term debt that will be due within one year can continue...
accounts: assets, liabilities, stockholders’ equity Income statement accounts: operating revenues, operating expenses, other revenues and gains, other expenses and losses The balances and activity in the general...
and sold, are included in the cost of goods sold on the income statement Examples of Raw Materials The direct materials for a bakery’s products will likely be flour, sugar, eggs, milk, vegetable oil, spices, and other...
and all of the liabilities as of the end of the month. Another adjusting entry records the depreciation of assets used in the business. Every month the company must prepare an adjusting entry that debits Depreciation...
in net income. Since the internet business was not purchased from another company and its cost to develop was not significant, the company’s balance sheet will report only the business’s cash, receivables and some...
. What is the amount of liabilities at the end of the year? Select... $28,000.00 $38,000.00 $58,000.00 $78,000.00 28. During a recent year, a corporation did not declare any dividends, did not issue any shares of stock,...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
Is the depreciation of delivery trucks a period cost or is it manufacturing overhead? The depreciation on the trucks used to deliver products to customers is a period cost. The depreciation on delivery trucks will be...
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
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...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
. It is this cost that your company should report as expense on its June income statement. The amount of the utility bills with meter reading dates of June 30 should be reported as a current liability (accounts payable)...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
of the illusory profit and brings attention to the need to increase selling prices or take other action to maintain its same level of profits. Avoiding paying income taxes on the illusory profits gives the company some...
, Equipment, Vehicles, Goodwill, and many more. Two asset accounts, Allowance for Doubtful Accounts and Accumulated Depreciation, are known as contra asset accounts since these accounts are expected to have credit...
are reported in the noncurrent (or long-term) asset section of the balance sheet in the section described as property, plant and equipment. The fixed assets except for land will be depreciated and their accumulated...
a very limited use. Accountants now use Allowance for Doubtful Accounts or Allowance for Bad Debts instead of Reserve for Bad Debts. In the case of plant assets, Accumulated Depreciation is used in place of Reserve for...
that has its cost of $50,000 in its account entitled Truck. The associated account Accumulated Depreciation has a credit balance of $43,000. The truck’s carry amount or book value is $7,000. A corporation has Bonds...
or the owner’s capital account, an expense will also cause one or more of the following changes to the balance sheet: A decrease in Cash, Prepaid Expenses, Supplies on Hand, Inventory An increase in the credit balance...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
What is an asset's useful life? Definition of Asset’s Useful Life An asset’s useful life is the estimated period of time (or total amount of activity) that a long-lived asset will be economically feasible for...
What is a calendar year? Definition of Calendar Year A calendar year is the 12 consecutive months from January through December. In other words, it is the 365 days (366 days in a leap year) beginning on January 1 and...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
What is marginal cost? Definition of Marginal Cost Marginal cost is a manufacturer’s cost to produce one more unit of product. In other words, marginal cost is the change in total costs when one additional unit is...
What is a product cost? Definition of a Retailer’s Product Cost In accounting, a retailer’s product cost is the cost paid to a supplier plus any other costs that are necessary to get the product in place and ready...
Is the provision for doubtful debts an operating expense? Definition of Provision for Doubtful Debts Some companies use Provision for Doubtful Debts as the name of the contra-asset account which is reported on 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...
the initial cash outlay for the project. The time value of money is not involved. (In other words there is no discounting of the cash flows.) The cash received in years 1 + 2 = $50,000 + $40,000 = $90,000 after two...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Featured Review
"I initially signed up as a member with AccountingCoach when I was in college for my accounting degree, and I can honestly say that AccountingCoach not only helped me pass college but also put me on the dean’s list for five semesters straight. Even after college, whenever I had to look up accounting information that I forgot or needed to refresh, AccountingCoach was always there for me to go back on and refresh my memory so I can always be on top of the game at work. Currently, I am a tax accountant with a focus on cryptocurrency, and I can honestly say I still use AccountingCoach to this day over 8 years later." - Aaron S.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: