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...
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...
cycle 4. A company’s balance sheet should report a company’s current assets in which order? Select... Alphabetical Largest first Most liquid first Smallest first 5. A company has a current ratio of 3:1 and a quick...
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...
. 1. Is it true or false that the amount of a company’s accounts payable is a key component of a company’s trade payables, current liabilities, and working capital? Select... True False View Coaching Accounts payable...
What is accounts receivable? Definition of Accounts Receivable Accounts receivable is the amount owed to a company resulting from the company providing goods and/or services on credit. The term trade receivable is...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
Why are some expenses deferred? Definition of Deferred Expenses Under the accrual basis of accounting, an expense is a cost that is used up, has expired, or is directly related to revenues reported on a company’s...
in a revenue account. A contra revenue account allows a company to see the original amount sold and to also see the items that reduced the sales to the amount of net sales. Examples of Contra Revenue Accounts Two...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
How do you calculate the payroll accrual? Definition of Payroll Accrual The payroll accrual is the amounts a company owes for work done by employees, but the amounts have not yet been recorded in the company’s general...
of the revenues will be available (after the variable expenses are covered) for the fixed expenses and net income. The contribution margin amount or ratio (ratio) can be presented for: The company as a whole A product...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
What is decentralization? Definition of Decentralization Decentralization refers to a company’s top management delegating authority to subunits or segments of the company such as a company consisting of a consumer...
will have to bring a claim against that person. In other words, the retailer will be on its own and will not be able to turn to an insurance company to take care of the problem. Self-insurance may be feasible if a...
account that is used to record the interest incurred. Lastly, interest expense is usually a separate line on a company’s income statement that indicates the amount that occurred during the period appearing in the...
What is a rolling budget? Definition of Rolling Budget A rolling budget often refers to a company’s operating budget which presents the future monthly budgets for the next 12 months. A rolling budget is also known as a...
What is the net method? Definition of Net Method In accounting, the net method likely refers to the way a company records each vendor’s invoice that offers an early payment discount. Example of Net Method Assume that a...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
What is the break-even formula? Break-even Point in Units of Product The formula for determining the break-even point in units of product sold is: total fixed expenses divided by the contribution margin per unit. For...
What is a responsibility center? Definition of Responsibility Center A responsibility center is a part or subunit of a company in which the manager has some degree of authority and responsibility. The company’s...
the company lists its cash inflows and cash outflows resulting from the disposal or acquisition of the company’s long-term assets that took place during the time indicated in the heading of the statement. Examples of...
Returns. This allows the company’s management to see the magnitude of the returns that occurred. The account Purchases Returns is a general ledger account that will have a credit balance (or no balance). Its credit...
for the gross amount received, but the IRS may use the term income to mean the gross amount received. While accountants use the term revenues when referring to a company’s sales of its merchandise, the same...
low. There can also be differences within the same industry. For example, one computer company might assemble and ship computers within hours of receiving the order via its website. Its inventory turnover will be off...
What are generally accepted accounting principles (GAAP)? Definition of Generally Accepted Accounting Principles Generally accepted accounting principles (commonly referred to as GAAP or US GAAP) are the common...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
of accounting, turnover is used to express the rate at which a company has to replace the employees who leave the company. Examples of Turnover in Financial Ratios The following are a few of the most common financial...
examples to show the usefulness of Herb’s tip. When a company receives the bank statement for its checking account, the bank statement already shows the deduction for the bank’s service charge. Therefore, the bank...
When do you adjust the amount of prepaid expenses? Definition of Adjusting Prepaid Expenses The balance in the current asset account Prepaid Expenses should be adjusted prior to a company issuing its financial...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
Are liabilities always a bad thing? Definition of Liabilities Liabilities are a company’s obligations and are usually defined as a claim on the company’s assets. However, liabilities (and stockholders’ equity) can...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
in the heading of the income statement. The estimated amount of Bad Debts Expense could be based on: A percentage of the company’s credit sales during the period, or The change in the total amount needed in the...
income was less than the budgeted net income The negative variances, which are unfavorable in terms of a company’s profits, are usually presented in parentheses. On the other hand, positive variances in terms of a...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
) effects on the accounting equation of the business or company. 2. The owner invests personal cash in the business. Assets Increase Right! The company's asset account Cash increases. Decrease Wrong. No Effect...
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