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...
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...
What type of account is the Dividends account? Definition of Dividends Account When a corporation declares a cash dividend, the amount declared will reduce the amount of the corporation’s retained earnings. Instead of...
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...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
What would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
Should an owner's compensation be recorded as an expense or in the Drawing account? If the enterprise is a sole proprietorship, the owner’s compensation should be debited to the Drawing account. If the enterprise is a...
liabilities. To help recognize the difference between a company’s profits and its cash flows, the statement of cash flows is one of the required external financial statements. Join PRO to Track Progress Mark the...
on the company’s balance sheet is accurate. The additions and deductions on the bank statement are compared (or reconciled) with the items that are entered in the company’s general ledger Cash account. Some...
, 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....
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...
are $206,000, which is a 3% increase YOY. In other words, the sales in the first 5 weeks of this fiscal year are 3% greater than the sales in the first 5 weeks of the previous fiscal year. Based on this statement, the...
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...
for the utility, its customers, and its stockholders. This is likely to attract investors wanting a steady stream of cash dividends which increase with inflation. To gain deeper insights for a specific corporation’s...
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...
that are affected by the Statement. In the left panel of the website, the first four links (Recent Additions, Action Alert, Project Activities, and Exposure Documents) allow you to monitor the status of rules being...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
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...
purchasing power is assumed to be constant or stable over time. Select... conservatism cost economic entity full disclosure going concern industry practices matching materiality monetary unit time period 7. Allows...
account such as Accrued Expenses Payable or Accrued Liabilities. Duplicate Payment The term duplicate payment refers to paying a vendor’s invoice twice. This double-payment could occur if a company pays a vendor’s...
financial statements using the accrual basis of accounting. Will the company’s wages expense for its hourly-paid employees (that is reported on its December income statement) be the same total amount that is reported...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
should normally be reported at its net realizable value. (U.S. income tax rules require conformity between tax and financial reporting. As a result, there are complexities involved.) Join PRO to Track Progress Mark the...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
statements Being eligible for a U.S. income tax benefit Having less inventory holding costs Being confronted with the total cost of holding items in inventory Join PRO to Track Progress Mark the Question as Read...
must report all of the amounts owed for work performed up to midnight of June 30. The expenses reported on the income statements for the month and year-to-date ended on June 30 must include all the payroll related...
, there is no annual wage limit or cap for the Medicare tax. In fact, there is also an Additional Medicare Tax that applies to high income employees. An Employer Must Match its Employees’ FICA Taxes In addition to the...
of $100,000 minus Discount on Receivable of $30,600). As WSC earns the $30,600 of interest over the next two years, it will credit Interest Income and debit Discount on Receivable. Join PRO to Track Progress Mark the...
will be at the break-even point, which is the point where sales will be equal to all of the company’s expenses. This is the point where the net income will be zero. Join PRO to Track Progress Mark the Question as Read...
: $60,000 Year 3: $80,000 Year 4: $100,000 Year 5: $70,000 The payback period is 3.4 years ($20,000 + $60,000 + $80,000 = $160,000 in the first three years + $40,000 of the $100,000 occurring in Year 4). Note that the...
for Allocating Manufacturing Overhead to Products US GAAP and US income tax regulations require manufacturers to assign variable and fixed manufacturing costs to the products they manufacture so that the units in...
asset) and credit Interest Revenue (or Income). Example of Accrued Interest Let’s assume that on December 16, a company borrows $20,000 from its bank at an annual interest rate of 6%. The first interest payment is due...
is required to make regular deposits into the bond sinking fund, which is likely managed by an independent trustee. The combination of the required deposits plus the income and gains from the sinking fund’s...
Prepaid Expenses for $100. The 12 monthly adjusting entries will: Report $100 expense on each of the monthly income statements Reduce Prepaid Expenses by $100 so the balance sheet will report the amount that has not...
. The inventory turnover ratios are high because the stores feature the fast selling brands at low prices. Their strategy is that huge sales volumes with small profit margins will still result in adequate net income...
be an increase to the net profit. If the business is a regular corporation, net profit may mean after income tax expense. Example of Net Profit Assume that a sole proprietorship business had the following information...
. Permanent accounts are closed at the end of each accounting year. Select... True False 10. A computerized bookkeeping system could mean you will not see an Income Summary account. Select... True False Any questions...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
corporations and other organizations. Some accountants and CPAs choose to have their own accounting firm and may focus on assisting small businesses with their accounting systems, financial statements, income tax...
prices in order to determine whether the quantity of inventory has increased or decreased. Base year is also the initial year in a series of annual amounts. For instance, an accountant might prepare a chart that...
Business X for $5 million based on Business X’s annual net income X 10. The fair value of Business X’s identifiable assets was $4 million and its liabilities were $1 million. Therefore, Company A is paying $5...
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