The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
Also referred to as real accounts. Accounts that do not close at the end of the accounting year. The permanent accounts are all of the balance sheet accounts (asset accounts, liability accounts, owner’s equity...
The expensing of an intangible asset from the balance sheet to the income statement.
to the company’s balance sheet where it will be reported as a liability. The title of the general ledger liability account may have the title of Unearned Revenues, Deferred Revenues, or Customer Deposits. As the...
, and the balance sheet amounts shown as a percentage of total assets. vertical analysis This type of analysis results in the income statement amounts shown as a percentage of net sales, and the balance sheet amounts...
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...
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
receivable to the amount that is more likely be collected. The income statement account Bad Debts Expense is part of the adjusting entry that increases the balance in the Allowance for Uncollectible Accounts. Effect of...
to the credits. Mark as wrong Mark as right adjusting entry This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a...
valuable asset. However, the accountant is not able to objectively convert those talented people into USDs. Hence, the management team will not be included in the reported amounts on the balance sheet. Example of...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
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...
, there is no contra asset account such as Allowance for Doubtful Accounts. Therefore the entire balance in Accounts Receivable will be reported as a current asset on the company’s balance sheet. As a result, the...
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
to be an adjusting entry dated December 31 to debit Interest Expense and to credit Interest payable for the amount of interest owed as of December 31. The principal balance on the mortgage loan already appears in the...
after subtracting the cost of goods sold from net sales. Mark as wrong Mark as right current assets This is defined as a company’s cash and other resources that are expected to turn to cash within one year of the...
. Which financial statement reports the assets and liabilities of a company? Select... Balance sheet Cash flow statement Income statement 17. The balance in a corporation’s account Retained Earnings should be...
is reported on the income statement and the related accounts receivable is reported on the balance sheet (until the receivables are collected). Unfortunately, some customers may not pay the amount owed to the company....
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
has a credit balance of $2,000, the readers of the balance sheet will see that customers owe $40,000 for past purchases but the company does not expect to collect $2,000 of the $40,000. Therefore, the net amount of the...
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...
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...
. Costs that are used up or expire in the current accounting period are reported on the income statement as __________. 6. The Allowance for Doubtful Accounts reduces the amount reported on the balance sheet for the...
as dividends to its stockholders. Are Retained Earnings an Asset? The amount of a corporation’s retained earnings is reported as a separate line within the stockholders’ equity section of the balance sheet. However,...
In accounting, are debit balances good? It is best if you accept the meaning that the word debit has had for 500 years: a debit is an amount entered on the left-side of an account. Don’t add “good” or “bad” or...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
of the company’s accounts receivable. Since the postdated check is not considered to be money until the date of the check, the accounts receivable should not be reduced and cash should not be increased until September...
. On January 31, the company pays the invoice and debits Accounts Payable and credits Cash for $300. The January 31 payment affected two balance sheet accounts. No expense or other income statement account was affected....
on the company’s balance sheet. Generally, the asset account balances are debit balances and are increased with a debit entry and decreased with a credit entry. Examples of Asset Accounts Some examples of asset...
, __________ liability, and stockholders' equity accounts are known as balance sheet accounts. 13. Large corporations should report revenues on their income statements when the __________. Cash Is Received Wrong....
that the objective of the accounting process is to have accurate financial statements. In this case we want an income statement which reports an accurate amount of cost of goods sold, and the resulting gross profit...
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...
overhead rate is a cost __________. Select... budget center driver pool 13. If a company has a significant difference between its manufacturing overhead incurred and manufacturing overhead applied, the difference should...
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...
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
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