of cash flows. Let’s use the following amounts to illustrate this situation. A company’s income statement for a recent year reported revenues of $2,000,000 and expenses of $2,075,000 for a net loss of $75,000. The...
of cash flows. Let’s use the following amounts to illustrate this situation. A company’s income statement for a recent year reported revenues of $2,000,000 and expenses of $2,075,000 for a net loss of $75,000. The...
. The aging is also useful for estimating the amount needed in the related account Allowance for Doubtful Accounts. Example of an Aging Report The aging report lists each customer’s name and its unpaid sales invoices...
). At the time of the sale: Company A reported a sale and a current asset, and Company B reported a purchase and a current liability At the time of payment: Company A’s Cash increased and its Accounts Receivable...
. On December 31, Jones Corporation will debit Cash for $10,000 and will credit Deferred Revenue for $10,000. Therefore, Jones Corporation’s December 31 balance sheet’s Cash will include the $10,000 and its current...
on the company’s balance sheet is an increase in current assets and an increase in owner’s or stockholders’ equity. The company’s income statement will also report the amount of the revenues earned. Example of...
What is liquidity? Definition of Liquidity Liquidity is a company’s ability to convert its assets to cash in order to pay its liabilities when they are due. Current Assets Generally, the assets that are expected to...
statement, statement of earnings). Rather, the equipment’s cost will be reported in the general ledger account Equipment, which is reported on the balance sheet under the classification Property, plant and equipment....
are not part of the seller’s sales or revenues. This means the amount of sales taxes that were collected by the retailer will not be reported on its income statement. Instead, the sales taxes collected are reported on...
(a balance sheet account) for $500, and credits Interest Income (an income statement account) for $500. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
on the company’s balance sheet is accurate. The additions and deductions on the bank statement are compared (or reconciled) with the items that are entered in the company’s general ledger Cash account. Some...
, the company’s asset Cash is decreased and its asset Prepaid Insurance is increased. Each month, one-sixth of the premium is recorded as Insurance Expense and the balance in Prepaid Insurance is reduced. When an...
that debits $1,000 to Interest Receivable (a balance sheet account) and credits $1,000 to Interest Income (an income statement account). Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
. In addition, your state government will likely have an office to assist in starting a new business. Accounting for Sole Proprietorships In accounting, the balance sheet of the sole proprietorship reflects the...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
is $6,000. Under the accrual basis of accounting, the retailer must report the $6,500 of accrued payroll as: An expense on its income statement for the period ended December 31 Current liability on its balance sheet as...
as an asset and expensed later. To defer the cost to the balance sheet is to capitalize the costs. Examples of Costs Being Expensed Costs are reported as expenses in the accounting period when they are used up, have...
current liability amount on its balance sheet. It also means that the accounts and amounts recorded as debits will better reflect the historical cost principle. If a company uses the net method, but fails to remit the...
that will be turning to cash.) For financial statement purposes the allowance method is the better method since 1) the balance sheet will be reporting a more realistic amount that will be collected from the company’s...
What is a capital expenditure versus a revenue expenditure? Definition of Capital Expenditure A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset...
. The amounts paid to the corporation by the original stockholders are reported as paid-in (or contributed) capital within the stockholders’ equity section of the corporation’s balance sheet. Join PRO to Track...
securities Accounts receivable Difference between Current Ratio and Quick Ratio To illustrate the difference between the current ratio and the quick ratio, assume that a company’s balance sheet reports current assets...
be divided up as follows: The correct portion of the total costs that pertain to the items in the current period’s ending inventory must be reported as a current asset on the company’s balance sheet The remainder of...
Prepaid Expenses for $100. The 12 monthly adjusting entries will: Report $100 expense on each of the monthly income statements Reduce Prepaid Expenses by $100 so the balance sheet will report the amount that has not...
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
of details, but still has the correct balance for preparing the company’s financial statements. Example of Control Accounts A common example of a control account is the general ledger account entitled Accounts...
beginning and ending balance sheets. The cash flow statement is one of the required external financial statements. Purpose of Cash Flow Statement The purpose of the cash flow statement is to provide the readers of a...
is the amount of interest the company has incurred but has not yet paid as of the date of the balance sheet. Interest Payable is also the title of the current liability account that is used to record and report this...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
for the workweek of June 22-28 might be calculated by the time the adjusting entry is prepared in early July and only the amounts for June 29 and 30 will need to be estimated.) The important point with the accrual...
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...
between the current ratio and working capital, assume that a company’s balance sheet reports current assets of $60,000 and current liabilities of $40,000. These amounts result in the following: Current ratio is 1.5 to...
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...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
tasks. Examples of Financial Accounting One part of accounting focuses on presenting the financial information in the form of general-purpose financial statements (balance sheet, income statement, etc.) that are...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
from the company’s present cash balance. Also assume that the company’s building materials, labor and overhead will amount to $400,000 during the three months of construction. The capitalized interest is based on...
Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
balance sheet as either a current liability or a non-current (or long-term) liability. Examples of Creditors Some creditors, such as banks and other lenders, have lent money to the company and will require the company...
capital. When a corporation’s common or preferred stock has a par value, corporation’s balance sheet will report the total par value of the shares issued for each class of stock. This will be shown as a separate...
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