statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
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 +...
and general management, are expenses of the accounting period and are not applied or assigned to products.) Actual overhead are the manufacturing costs other than direct materials and direct labor. Since the overhead...
be the case under the allowance method. [The Internal Revenue Service requires the direct write off method in order to prevent taxpayers from claiming a bad debts expenses based on an anticipated potential loss.] Join...
liability account such as Accrued Expenses and Liabilities. To learn more about the various aspects of accounts payable, see our Explanation, Quiz, Q&A, and more. Join PRO to Track Progress Mark the Question as Read...
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...
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...
liability accounts including Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits stockholders’ equity accounts such as Common Stock, Retained Earnings, Treasury Stock, and Accumulated...
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...
What are semivariable costs? Definition of Semivariable Costs Semivariable costs are costs or expenses whose behavior is partially fixed and partially variable. That is, part of the total cost does not increase or...
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...
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...
, 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...
to the next accounting year, a nominal account is also referred to as a temporary account. Examples of Nominal Accounts The nominal accounts are almost always the income statement accounts such as the accounts for...
in accounts receivable, inventory, accounts payable, and most other current assets and current liabilities. The direct method for reporting the cash from operating activities lists the following: the amounts collected...
If repairs expense was budgeted to be $50,000 but the actual repairs expense ends up being $63,000, the $13,000 variance is unfavorable because having more actual expenses than were budgeted was not good for the...
, 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...
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...
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...
, 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...
and expenses under the accrual basis of accounting). A company’s significant cash flows are reported in the statement of cash flows, which is organized as follows: Cash flows from operating activities Cash flows from...
. This is needed because the accrual basis of accounting requires the income statement to show the revenues that were earned (not the money actually received) and the expenses incurred or matched to the accounting period...
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...
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...
, 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...
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...
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...
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...
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,...
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...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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 the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
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...
by $4,000. Since both sides of the accounting equation increase by $4,000, the accounting equation remains in balance: Expenses Decrease Owner’s Equity and Affects Another Account Owner’s equity will decrease when a...
, vehicles, etc. Liabilities Liabilities are the obligations that a corporation owes as of the final moment of the date shown in the heading of the balance sheet. Examples of liabilities include accounts payable, loans...
by $50,000 during the year and revenues amounted to $125,000, what were the expenses for the year? Select... $75,000.00 $175,000.00 29. During the year a sole proprietorship’s assets increased by $25,000 while its...
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...
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