What is a comparative income statement? A comparative income statement will consist of two or three columns of amounts appearing to the right of the account titles or descriptions. For example, the income statement for...
What is a comparative income statement? A comparative income statement will consist of two or three columns of amounts appearing to the right of the account titles or descriptions. For example, the income statement for...
for a corporation to make a dividend payment: The corporation’s board of directors must declare the dividend, and The corporation must distribute the cash Example of Recording a Dividend Payment to Stockholders On the...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
What is the difference between paid-in capital and retained earnings? Definition of Paid-in Capital Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount...
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
What is the difference between product costs and period costs? A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is...
What is a mortgage loan? Definition of Mortgage Loan A mortgage loan is a loan associated with the purchase of real estate, such as a home or buildings used in a business. As part of the loan process, the lender files a...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings, profits). The...
How do I calculate the cost of goods sold for a manufacturing company? Calculation of the Cost of Goods Sold for a Manufacturer The calculation of the cost of goods sold for a manufacturing company is: Beginning...
Why are bonds payable less costly than common stock? Bonds payable are less costly than common stock because the bonds issued by a corporation contain a formal contract to pay the investor a fixed amount of interest...
What is accrued rent? Definition of Accrued Rent Accrued rent is the amount of rent that has not yet been paid by the tenant or received by the landlord for a past period of time. [If the tenant always pays the monthly...
What are some examples of financing activities? Definition of Financing Activities Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement...
How should a mortgage loan payable be reported on a classified balance sheet? Definition of a Mortgage Loan Payable The account Mortgage Loan Payable contains the principal amount owed on a mortgage loan. (Any interest...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
). 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...
Why is interest expense a nonoperating expense? Definition of Interest Expense as a Nonoperating Expense Interest expense is the cost of borrowing money. For most companies the borrowing of money is not part of their...
for deposit to account #xxxx followed by the payee’s signature. Many companies endorse checks by using a rubber stamp containing this restriction. Another example of a restrictive endorsement is Pay to the order of...
from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
What is meant by nonoperating expenses and losses? Definition of Nonoperating Expenses and Losses Nonoperating expenses are business expenses that are outside of a company’s main or central operations. (Some describe...
Why is a product that sells for $50 reported in inventory at its cost of $40? Generally, items in inventory are valued at their cost—not their selling prices—because of the cost principle. Another reason for not...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
What is Subchapter S? Subchapter S refers to a section of Chapter 1 of the U.S. Internal Revenue Code. A subchapter S corporation, which is also referred to as an S corporation, is a corporation that does not pay the...
What are gross wages? Definition of Gross Wages Gross wages are the amounts earned by employees before the payroll withholding taxes and other deductions are subtracted. Sometimes gross wages is used to describe the...
What is not sufficient funds? Definition of Not Sufficient Funds Not sufficient funds or NSF or insufficient funds is a term to describe a check that has been returned by the bank because the balance in the checking...
What is an expense? Definition of Expense Under the accrual method of accounting, an expense is a cost that is reported on the income statement for the period in which: The cost best matches the related revenues The cost...
an additional share of stock, the difference of $19.90 will be recorded in a separate stockholders’ equity account entitled Premium on Common Stock or Paid-in Capital in Excess of Par Value–Common Stock . Join PRO...
the stock is issued, the corporation will debit Cash and will credit its stockholders’ equity account Common Stock for the amount received. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn...
What are consolidated financial statements? Definition of Consolidated Financial Statements Consolidated financial statements are financial statements for a group of separate legal entities that are controlled by one...
What is the fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
Why is an amount in the cash flows from investing activities shown in parenthesis? An amount shown in parenthesis within the investing activities section of the cash flow statement indicates that cash was used to...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
as a reduction in the company’s Cash account and an increase in an asset account such as Advance to Employees or Other Receivables: Advances. (If the amount is expected to be repaid within one year, this account will...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
What is OEM and EOM? OEM is the acronym for original equipment manufacturer. EOM is the acronym for end of month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
What is the statement of cash flows? Definition of Statement of Cash Flows The statement of cash flows (SCF) is one of the required external financial statements. The SCF is commonly referred to as the cash flow...
. The landlord requires a security deposit of $1,000. The company debits the long-term asset Security Deposit for $1,000 and credits Cash for $1,000. The landlord debits Cash for $1,000 and credits a liability account...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
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