. The amount owed by customers are included in the balance of the current asset account Accounts Receivable. In other words, the terms bad debt and doubtful debt have the same meaning. Example of Bad Debt and Doubtful...
. The amount owed by customers are included in the balance of the current asset account Accounts Receivable. In other words, the terms bad debt and doubtful debt have the same meaning. Example of Bad Debt and Doubtful...
What is accrued payroll? Definition of Accrued Payroll Accrued payroll includes wages, salaries, commissions, bonuses, and other payroll related expenses that have been earned by a company’s employees, but have not yet...
The chart of accounts is likely arranged in the same order as the general ledger. That is, the balance sheet accounts are listed first, followed by the income statement accounts. A large corporation’s chart of...
What causes an increase in break-even point? Definition of Break-even Point The break-even point is the sales volume or sales revenue that is needed to cover the company’s expenses. In other words, it is the point...
on the automakers’ balance sheets at the time that the cars are sold. The other part of the journal entry is to debit Warranty Expense and report it on the income statement. Definition of an Estimated Liability An...
to the financial statements is usually a summary of the company’s significant accounting policies for the use of estimates, revenue recognition, inventories, property and equipment, goodwill and other intangible...
accountants or CPAs. Many accountants leave the larger public accounting firms after several years of experience and become an employee at a business or other organization. In their new position they are referred to as...
over that life. Other intangible assets have an unlimited life and are not amortized. However, their reported cost is reviewed annually. If there is an impairment loss, the amount on the balance sheet is reduced and the...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
How do I calculate IRR and NPV? Definition of IRR The internal rate of return (IRR) method or model determines the interest rate that discounts all cash inflows and cash outflows to a net present value of $0. In other...
. The amount of the insurance premiums that remain prepaid at the end of each accounting period are reported in the current asset account, Prepaid Insurance. The balance in this account will be combined with the balances...
that the company’s balance sheet will include the amount as a current liability. (The adjusting entry typically debits Wages Expense and credits Wages Payable.) Example of Wages Payable To illustrate wages payable we...
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...
of the calendar month. 9. The federal form on which an employee indicates the number of allowances to be used by the employer when calculating the federal income tax withholding is the __________ W-4 form. 10. An...
or other assets into the business. For example, if M. Jones invests $20,000 of cash in her business, the company’s asset Cash increases by $20,000 and the owner’s equity account M. Jones, Capital increases by...
What is the meaning of debtor? Definition of Debtor A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed. Example of Debtor If...
A subgroup of a nonprofit’s supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The current year net income might be in the temporary revenue and expense accounts and...
in the heading of SCF. Examples of Financing Activities Sources of cash provided by financing activities include: Borrowing money on a short-term basis and/or long-term notes basis from a bank or other lenders...
’ federal and state unemployment taxes. Mark as wrong Mark as right payroll withholding These amounts are deducted from employees’ paychecks for Social Security tax, Medicare tax, federal and state income taxes, and...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
other costly activities). If another product requires no additional activities other than having the production machine run 24 hours a day, the product will be assigned lots of overhead costs (even though it required no...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
by the company within one year of the balance sheet date. An example is a retailer’s unredeemed gift cards. Accrued compensation which includes a company’s obligations related to employees working for the company....
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. If the units produced vary significantly from each other, a __________ costing system may be more...
products or services are __________ __________ each other. Select... different from similar to 11. The numerator in the calculation of a predetermined overhead rate is the __________ amount of factory overhead....
, 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...
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...
of goods sold on the income statement. Inventory is important for a company’s profitability and survival. For instance, if a retailer or manufacturer does not have sufficient inventory of requested items, the result...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
on December 31 for the estimated amount. If the estimated amount is $18,000 the retailer will debit Temp Service Expense for $18,000 and will credit Accrued Expenses Payable for $18,000. This adjusting entry assures...
is also known as the times interest earned ratio. The interest coverage ratio is computed by dividing 1) a corporation’s annual income before interest and income tax expenses, by 2) its annual interest expense. 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...
What is Subchapter S? Subchapter S refers to a section of Chapter 1 of the U.S. Internal Revenue Code. A subchapter S corporation, which is also referred to as an S corporation, is a corporation that does not pay the...
What is revenue? Definition of Revenue Revenue is the amount a company receives from selling goods and/or providing services to its customers and clients. A company’s revenue, which is reported on the first line...
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