Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
with the current assets accounts receivable and inventory. While these two assets are initially recorded at cost, there are occasions when the company will collect less than the cost. When that occurs, the company must...
is that the last or more recent cost is closer to the replacement cost. A similar situation occurs with depreciation. Under GAAP the amount of depreciation expense reported in the financial statements is based on the...
such as an exchange of common stock for a significant asset. 7. Generally, the changes in current assets and current liabilities (except loans payable) will be classified under which section of the statement of cash...
equal to credits, the account balances must satisfy the accounting equation, which is: Assets = Liabilities + Stockholders’ Equity Asset accounts (normally debit balances) include: Cash Accounts receivable Inventory...
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...
or lower its selling prices 7. Property, plant and equipment are __________ assets. Select... current noncurrent 8. The title of the contra asset account that is reported in the section with the heading property, plant...
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 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...
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 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...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
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...
and to increase the balance you need to CREDIT the account. Credit Right! To increase a liability you credit the liability account. Cash Debit Right! Cash and other assets are debited to increase their balances. Credit...
Intangible assets of $20 million Intangible asset of $10 million Disclosing the market values in notes to the financial statements View Coaching If a company develops its brand names and trademarks over time through...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
What is separation of duties? What is Separation of Duties The separation of duties is one of various internal control techniques for safeguarding a company’s assets. By separating employee’s duties, the likelihood...
How do drawings affect the financial statements? Definition of Drawings Drawings are the withdrawals of a sole proprietorship’s business assets by the owner for the owner’s personal use. The drawings or draws by the...
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...
, their balances are on the right side of the accounts similar to their position in the accounting equation: assets = liabilities + owner’s equity. The revenue accounts (which are temporary accounts) also have credit...
, seasonal variations will be included. Using only the end of year point for two years is generally not indicative of the inventory levels in the months throughout the year. The 13-point average is also useful for...
How do you amortize goodwill? Definition of Amortize Goodwill Prior to 2001, to amortize goodwill meant to consistently and in uniform increments move the reported amount of the intangible asset goodwill from the balance...
Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
in which the office furniture is recorded, such as Furniture and Fixtures or Office Furniture. In other words, the discount is a reduction of the asset’s cost. [If the discount is received by a retailer who is in the...
with a reseller’s certificate, which allows the supplier to not charge the sales tax. If a sales tax is paid by the reseller and the sales tax could have been avoided, the sales tax would have to be expensed...
: To have cash available for unforeseen events and for increases in its costs To reduce its long-term debt or repurchase shares of its common stock To increase inventory to expand, to purchase in larger quantities for...
of a company’s financial position at the end of the accounting year. The reason is that all assets that were earned are reported and all liabilities that were incurred will be reported on the balance sheet. The...
marketable securities of $20,000 + accounts receivables of $93,000. This adds up to $120,000 of quick assets. If the company’s current liabilities amount to $100,000 the acid test ratio is 1.2:1. A large acid test...
to be part of the cost of items purchased, since an asset’s cost is defined as all costs that are necessary to get the asset in place and ready for use. Join PRO to Track Progress Mark the Question as Read Must-Watch...
What is disinvestment? In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital...
Typically, the combined amount of cash and cash equivalents will be reported on the balance sheet as the first item in the section with the heading current assets. Join PRO to Track Progress Mark the Question as Read...
What is historical cost? Definition of Historical Cost Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a transaction. The term historical...
asset turnover and fixed asset turnover are indicators of a company’s effectiveness in utilizing its assets. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
What is the difference between receivables and accounts receivable? Definition of Accounts Receivables Accounts receivable are usually current assets that result from selling goods or providing services to customers on...
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