balance is an internal accounting report that merely documents the equality of debits and credits. It is not a financial statement. The trial balance was crucial internal report when the accounting records were...
balance is an internal accounting report that merely documents the equality of debits and credits. It is not a financial statement. The trial balance was crucial internal report when the accounting records were...
the $560 of wages payable that Jane had earned and the company owes as of December 31. (The company’s income statement for the year that ends on December 31 must also report the $560 as part of its wages expense.) The...
What is cash from operating activities? Definition of Cash from Operating Activities Cash from operating activities usually refers to the first section of the statement of cash flows. Cash from operating activities...
over that life. Other intangible assets have an unlimited life and are not amortized. However, their reported cost is reviewed annually. If there is an impairment loss, the amount on the balance sheet is reduced and the...
to the health insurance company. Then in account 4211 they can see the portion of the cost that was paid by the employees. The company’s income statement will report the combination of the amounts in accounts 4210 and...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
statement account Sales Returns and Allowances is a contra revenue account that is associated with the revenue account Sales. If the balance in this contra account is a debit of $3,000 and the Sales account has the...
the systematic allocation of an asset or liability amount from the balance sheet to expense (or revenue) on the income statement. Here are a few examples: The debit balance in the contra liability account Discount of...
What is turnover? Definition of Turnover In accounting, the term turnover can have more than one meaning. In some countries turnover is used in place of sales. Turnover also pertains to certain financial ratios that...
labor the cost of manufacturing overhead Note: Expenses that are outside of the manufacturing facilities, such as selling, general and administrative expenses, are not product costs and are not inventoriable. They are...
inventory costs on the balance sheet because the latest, higher costs were removed from inventory ahead of the older lower costs LIFO means that the cost of goods sold on the income statement will contain the higher...
they are depreciated over their useful lives. The accumulated depreciation for these assets is also reported as part of the property, plant and equipment. The amount of capital expenditures for an accounting period is...
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...
, the company’s Marketing Consultants Expense will be the account that is understated by $20,000. As a result of the $20,000 understatement, the company’s income statement will report too little of SG&A expenses,...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
result in an income statement gain or loss. The shares of treasury stock can be sold, retired, or could continue to be held as treasury stock. Example of Treasury Stock A corporation has excess cash and does not see any...
) and the income statement will report supplies expense of $7,500 (1,500 units at $5). Assume that a company purchases a delivery truck to be used in its business. Initially the truck’s cost will be recorded in the...
and its cost of goods sold. In the U.S. the common cost flow assumptions are FIFO, LIFO, and average. A company’s cost of inventory is related to the company’s cost of goods sold that is reported on the company’s...
are credited to Inventory and are debited to the income statement account Cost of Goods Sold The costs of purchase returns, purchase allowances, and purchase discounts are credited to Inventory Companies often have...
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...
, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The calculation is presented as a schedule or statement....
Inventory and will be the first costs to be included in the cost of goods sold on the income statement. Therefore, under the FIFO cost flow assumption the most recent costs will remain in Inventory to be reported on the...
and sold, are included in the cost of goods sold on the income statement Examples of Raw Materials The direct materials for a bakery’s products will likely be flour, sugar, eggs, milk, vegetable oil, spices, and other...
income statement. Since the costs of products may be higher when they are reordered/purchased, the order in which their costs are removed from inventory will have an impact on the inventory valuation and the amount...
(a noncurrent or long-term asset). The total cost will then be depreciated over the building’s useful life. (On the other hand, interest to finance the company’s operations or to build equipment is not capitalized....
, 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...
statement Therefore, if too much of the total cost is assigned to the ending inventory, too little will be assigned to the cost of goods sold. And vice versa. Further, the cost reported as inventory will affect the...
to earn less than the specified interest rate. Comparison of IRR and NPV Both IRR and NPV use a company’s cash inflows and cash outflows that are discounted to a present value. (Neither use the accrual...
has not earned any of the contract amount and therefore does not have a right or a receivable to the $20,000 as of December 31. Similarly, Company Jay’s income statement for December and its December 31 owner’s...
are traded on a stock exchange, the earnings per share must appear on the face of its income statement. Example of Earnings per Share Assume a corporation has only one class of common stock outstanding and has no...
with the heading “Debit balances” and the credit balance amounts are listed in another column with the heading “Credit balances.” The total of each of these two columns should be identical. Examples of the Trial...
Insurance Expense. Since adjusting entries involve a balance sheet account and an income statement account, it is wise to monitor the balances in both Prepaid Insurance and Insurance Expense throughout the year. The...
’ equity section of the balance sheet. The weighted-average number of shares of common stock outstanding during the year is used to compute the corporation’s earnings per share often shown at the bottom of the...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
account and credits the owner’s drawing account. Please note that the owner’s drawing account is not an expense and as a result it does not get closed to the Income Summary account nor will the amount appear on the...
of the owner’s capital account and a drawing account. The drawing account is a temporary account in which the owner’s current year draws or withdrawals are recorded. The sole proprietor withdraws money for personal...
the amounts appearing on a company’s external income statement. Example of Contribution Margin Ratio Assume that a company manufactures and sells a single product and has the following information: Selling price per...
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
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