that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
can be compared to the ratios of other companies in the same industry. An accounting ratio can also be compared to the company’s same ratio in recent periods to see whether the company is improving or declining....
in previous years and to other companies in the same industry. Even with a favorable inventory turnover ratio, a company may have some excess and obsolete inventory items. Therefore, it is wise to compare the...
value. For example, the “A” items might be 20% of the items in inventory which account for 70% of the inventory value. At the other extreme the “C” items might be 60% of the items in inventory but they account...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
margin ratios vary between industries. Therefore, you should compare a company’s gross margin ratio to other companies in the same industry and to its own past ratios or its planned ratios. Join PRO to Track Progress...
on credit and offers an early payment discount expressed as 1/10, net 30. This means that a customer is allowed to deduct 1% of the invoice amount, if payment is made within 10 days (instead of paying the full...
What is job order costing? Definition of Job Order Costing Job order costing or job costing is a system for assigning and accumulating manufacturing costs of an individual unit of output. The job order costing system is...
What does debit memo mean on a bank statement? Definition of Bank Debit Memo A debit memo on a company’s bank statement refers to a deduction by the bank from the company’s bank account. In other words, a bank debit...
variance indicates that the variance (or difference between the budgeted and actual amounts) was not good for the company’s profits. In other words, this unfavorable variance is one reason for the company’s actual...
What is the debt to total assets ratio? Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you the percentage of a company’s total...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
What is a fixed budget? Definition of Fixed Budget A fixed budget is a budget that does not change or flex for increases or decreases in volume. (“Volume” could be sales, units produced, or some other activity.) A...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense Credit Wages Payable or credit Accrued Wages Payable Wages...
will be matched with the $60,000 of increased electricity revenues it will be reporting on its five annual income statements. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
What are turnover ratios? Definition of Turnover Ratios In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by an average asset amount for the same year....
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services,...
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
management of their magnitude. Therefore, gross sales can also be defined as the company’s sales revenues before deducting the sales returns, sales allowances, and sales discounts. (The amount remaining after these...
that were provided. This is done with a debit to the liability account Gift Certificates Outstanding and a credit to a revenue account. Our explanation pertains to financial accounting. To learn about the income tax...
deferred income taxes customer deposits Some long-term debt that will be due within one year of the balance sheet date can continue to be reported as a long-term liability if there is: a long-term investment that is...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
+ Revenues – Expenses – Dividends – Treasury Stock. The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2)...
, to reduce rent, etc. To satisfy stockholders who prefer appreciation in the value of the corporation’s common stock instead of receiving cash dividends that require current income tax payments Join PRO to Track...
What is the difference between loan interest and bank loan repayment? Definition of Loan Interest Loan interest is the expense a borrower incurs for using a lender’s money. Loan interest is also the income earned by a...
accounts such as Accounts Payable, Notes Payable, Accrued Liabilities, Deferred Income Taxes, etc. Owner’s (Stockholders’) equity accounts including Owner’s Capital, Common Stock, Retained Earnings, and others...
.), the amount received is not recorded as a sale. (Instead, the company will report this transaction on its income statement as a gain or loss on the disposal of an asset.) Example of Sales The amounts recorded at the...
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
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...
of an asset was an investor purchasing new shares of preferred stock, the corporation would credit the stockholders’ equity account Preferred Stock and perhaps Paid-in Capital in Excess of Par—Preferred Stock, or...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
What are common-size financial statements? Common-size financial statements present the financial statement amounts as a percentage of a base number. For example, the common-size income statement will report the revenue...
expense for 10 years. (U.S. income tax rules allow accelerating the yearly depreciation amounts, but the total amount of depreciation cannot exceed the asset’s cost.) Join PRO to Track Progress Mark the Question as...
). The company will record a December 31 accrual adjusting entry which debits Interest Receivable for $300 and credits Interest Income for $300. The Interest Receivable account balance will be reported on the company’s...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
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