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...
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...
currency does not change over time. monetary unit assumption This accounting guideline assumes that the purchasing power of a company’s currency does not change over time. Mark as wrong Mark as right matching...
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 Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. 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...
) of accounting. The accrual method means that 1) revenues and a related receivable will be reported when they are earned and collection is assured, and 2) expenses and a related payable will be reported when an expense...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Service departments are likely to be __________ centers. Select... cost profit revenue 2....
to be __________ __________ __________ cost. Select... a direct product an indirect product a direct period 17. Minor amounts of supplies, such as the glue and sandpaper used in manufacturing a product are likely to be...
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...
of the page. 1. Which of the following accounting methods will result in a better matching of expenses with revenues and will provide a better indication of a company’s financial position? Select... Accrual method...
on the right side of the accounting equation. Credit entries appear on the right side of a T-account.] 2. What type of entry will increase the normal balance of the general ledger account that reports the amount owed as...
have debit balances and are debited to increase their balances. Supplies Expense Debit Right! Supplies Expense should be debited. Except for special situations (correcting entries, closing entries, and some adjusting...
Temporary investments Accounts receivable Inventory Supplies Prepaid expenses Current Liabilities Current liabilities are the company’s obligations that will come due for payment within one year of the balance...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that the...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance? An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease...
off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper. (Examples include interest on bank loans since the last loan payment, wages earned by...
statements to the earlier financial statements of the same company Compare a company’s financial statements to those of other companies (especially within the same industry) Understand how a company...
be reported. The negative net income occurs when the current year’s revenues are less than the current year’s expenses. If the cumulative earnings minus the cumulative dividends declared result in a negative...
and Over provides a way to monitor employees’ cash handling proficiency. Generally, the amounts in the account Cash Short and Over are so small that the account balance will be included with other insignificant...
Adding the increase in accrued expenses payable Example of the Direct Method of SCF When the direct method of presenting a corporation’s cash flows from operating activities is used, the amount of net income is not...
was widely discussed in the 1970s for businesses and governments. Today, it is again being discussed since a few large corporations have used the ZBB process to significantly reduce unnecessary expenses. Join PRO to...
as a current liability such as Accrued Expenses Payable. On the corporation’s income statements, the interest that occurred (whether paid or not paid) during the period of the income statement will be reported as...
: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash. (Therefore, a credit...
, sheltered) because the loss was also deductible on the company’s income tax return. net income. Revenues and gains minus expenses and losses. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
and an industrial division to more effectively market the company’s products. Each division’s manager is responsible for sales and expenses. However, if the company’s executive team makes all of the investment...
will appear as expenses on the income statement. Unfortunately those recorded costs may not measure the economic reality that is occurring in the period of the income statement. Join PRO to Track Progress Mark the...
on its investments. The investment interest and dividend amounts earned will be reported on the income statement as other income. To provide more clarity, accountants use the term net income to describe the amount...
the detailed information on revenues and expenses that would be available under the transaction approach. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
. As of November 30 none of the $2,400 cost has expired and the entire $2,400 will be reported on the balance sheet as Prepaid Insurance or Prepaid Expenses. On December 31, an adjusting entry will debit Insurance...
, the entry to record the stock dividend will be a debit of $250,000 to Retained Earnings and a credit to a paid-in capital account such as Common Stock. It is important to note that dividends are not expenses and...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
will include preparing the following projections for the next accounting year: Amounts for sales Amounts for producing goods Amounts for each department’s expenses Summarizing the above budgets into a master budget or...
of $250, but the bill will be paid 10 days later. Since owner’s equity is reduced by expenses (and is increased by revenues), the bookkeeping equation will show the following: Assets of $900 = Liabilities of $250 +...
statements. I reported on the impact on the company’s expenses in great detail. I thought I was done until the controller drew two T-accounts on a piece of paper and noted my comments in the expense T-account, and...
, the $850 of revenues minus the related expenses results in the amount of net income. Effect from Collecting an Account Receivable Assume that on January 8, HRS receives the $850 from the customer whose furnace was...
, and prepaid expenses. Evaluating Liquidity Liquidity depends on 1) the speed at which the assets should be turning to cash, or 2) the assets’ nearness to cash. For example, some temporary investments are marketable...
What is the difference between a budget and a standard? Definition of a Budget In business and other organizations, a budget often refers to a department’s or a company’s projected revenues, costs, or expenses....
that a company’s: Income statement reports the revenues that have been earned during the accounting period Balance sheet reports the receivables that it has a right to receive as of the end of the accounting period...
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