This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
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...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
-in-Progress. Construction Work-in-Progress is often reported as the last line within the balance sheet classification Property, Plant and Equipment. There is no depreciation of the accumulated costs until the project is...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
One of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities,...
are also referred to as permanent accounts. Examples of Real Accounts The real accounts are the balance sheet accounts which include the following: Asset accounts (cash, accounts receivable, buildings, etc.) Liability...
. A deferred credit is reported as a liability on the balance sheet. Depending on the specifics, the deferred credit might be a current liability or a noncurrent liability. In the past, it was common to see a noncurrent...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
A company’s receipts that appear on the company’s records but do not yet appear on the bank statement. For example, a retail store’s receipts of March 31 are deposited after banking hours on March 31 or...
A corporation may want to see the effects of three possible financing options. Therefore, it prepares a projected balance sheet, income statement, and statement of cash flows for each of the three financing options....
Financial statements that reflect the total economic entity. For example, on a consolidated income statement a corporation having several subsidiaries would report the total of all of its companies’ sales that were...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
In accounting this word is often included in the title of liability accounts. It means the amount owed by a company as of the balance sheet date, even if the company did not yet receive an invoice from the supplier. For...
What is the difference between fixed assets and noncurrent assets? Fixed Assets are Part of Noncurrent Assets Fixed assets are one of several categories of noncurrent assets. Fixed assets are usually reported on the...
known as an outstanding check. An unpresented check is listed on a bank reconciliation as a subtraction from the bank balance. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
of the page. 1. A corporation’s stockholders’ equity (or shareholders’ equity) presented on its balance sheet represents what type of claim to the corporation’s assets? Select... Primary Secondary or residual...
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...
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...
. Today the building continues to be used by the company and it plans to continue using it for many more years. The company’s current balance sheet will report the building at its cost of $600,000 minus its accumulated...
is sold for $5,000. If the truck had a cost of $40,000 and accumulated depreciation of $35,000 there will be no gain or loss reported on the income statement. The reason is the $5,000 received is equal to the $5,000 of...
. corporations should include all of the following: Income statement Statement of comprehensive income Balance sheet or statement of financial position Statement of cash flows Statement of stockholders’ equity Join PRO...
with its suppliers, the company will have the benefit of having a larger cash balance (even though the amount of working capital will not change). Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
income. Retained earnings and accumulated other comprehensive income are reported on separate lines within stockholders’ equity on the end-of-the-period balance sheet. Join PRO to Track Progress Mark the Question as...
statement, statement of comprehensive income, balance sheet, statement of cash flows, and statement of stockholders’ equity) The notes to the financial statements Press releases and conference calls regarding...
What is the difference between adjusting entries and closing entries? Definition of Adjusting Entries Adjusting entries are made at the end of the accounting period (but prior to preparing the financial statements) in...
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...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Revenues. Since these are balance sheet accounts (and since no work has yet been performed), there are no revenues to be reported in December. In April when the first service is provided, the company will debit the...
of __________ accounts. 9. Customer Deposits and Unearned Fees are examples of accounts under the balance sheet classification of __________. 10. Each revenue and expense account will begin the accounting year with...
this asset’s account balance must be decreased. Therefore, the second part of the entry will have to be a debit. In this transaction the account Rent Expense will be debited for $600. (Recall that expenses must be...
, it results in a liability to appear on the balance sheet for the end of the accounting period. The matching principle is associated with the accrual basis of accounting and adjusting entries. If an expense is not...
as of June 20th. Since the balance sheet is dated June 30th (and the income statement is for the entire month of June), an adjusting entry should be made to record the additional liability for the utilities used from...
and the purchases of gas by NEP from MGC did not occur outside of the group of companies, these purchases are also eliminated.) The consolidated balance sheet of NEP will report all of the cash, receivables, plant, etc....
costs. In turn, management can take action to correct the problems, seek higher selling prices, etc. Since the company’s external financial statements must reflect the historical cost principle, the standard costs in...
is $147,000. This amount is also known as the Social Security annual wage limit, wage base, contribution and benefit base, ceiling, tax cap, and maximum taxable earnings. The maximum amount is adjusted annually based on...
method, the interest expense will be included in the company’s net income or net earnings. The interest expense is adjusted to a cash amount through the changes to the working capital amounts, which are also reported...
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