What is the accrual method? Definition of Accrual Method The accrual method of accounting reports revenues on the income statement when they are earned even if the customer will pay 30 days later. The accrual method of...
What is the accrual method? Definition of Accrual Method The accrual method of accounting reports revenues on the income statement when they are earned even if the customer will pay 30 days later. The accrual method of...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement...
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...
that are not reported on the corporation’s income statement. Treasury stock. This is a reduction of stockholders’ equity for the amount the corporation paid to purchase but not retire its own shares of capital...
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
Treasury stock – total cost Retained earnings Accumulated other comprehensive income or loss Total stockholders’ equity Examples of the Descriptions for the Rows or Lines Appearing on the Statement Some typical...
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...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
What is the difference between dividends and interest expense? Definition of Dividends Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and...
position and the for-profit corporation’s balance sheet is the equity section: The for-profit corporation’s equity section has the heading Stockholders’ Equity. Within this section are the paid-in capital amounts...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
What is comprehensive income? Definition of Comprehensive Income Comprehensive income for a corporation is the combination of the following amounts which occurred during a specified period of time such as a year,...
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...
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...
that the balance sheet reports the net amount that is expected to be collected. The credit balance in the Allowance account is associated with the income statement account Bad Debts Expense. In other words, when a...
show a negative net income. margin of safety This is the amount of sales above the break-even point. It is the amount by which sales could drop before the company would show a negative net income. Mark as wrong Mark as...
invoices. MATCH MCTAH Unscramble MATCH CMATH Unscramble 4. Vendor invoices for repairs and maintenance are likely debited to this type of account. EXPENSE EPXSNEE Unscramble EXPENSE XENEEPS Unscramble 5. This type of...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
cash balance (or) credit balance in cash account This type of cash balance usually results from writing checks without sufficient funds available. As a result this amount should be reported as a current liability. Mark...
activities. The combination of the cash inflows and the cash outflows from a company’s operations (activities outside of its investing and financing activities). loss on disposal, net of tax. An accounting loss on the...
Income Statement Income Statement The income statement is also known as the statement of income, statement of operations, statement of earnings, profit and loss statement, and P&L. It reports a corporation’s...
. The specified rate could be the investor’s cost of capital or it could be another hurdle rate that must be earned. Advantages of using the net present value to evaluate investments include the following: All of an...
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...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
or to the proprietor’s capital account at the end of each accounting year.) Contra-revenue accounts including Sales Discounts, Sales Returns, etc. (The debit balances in these accounts allow for the reporting of both...
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...
containing the adjusted balances for the asset, liability and owner’s equity accounts. Under the Income Statement columns, the difference between the total of the debit column and the credit column is the amount of...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
, revenue is the amount earned from customers and clients before subtracting the company’s expenses. Revenue vs Net Income While revenue is the top line on a company’s income statement, net income is often referred...
') Equity to increase. (In a proprietorship the owner's Capital account will increase. In a corporation the Retained Earnings account will increase.) Decrease Wrong. No Effect Wrong. 11. In June, Company X...
. The stockholders’ equity section of the balance sheet is divided into several parts: Paid-in (or contributed) capital Retained earnings Accumulated other comprehensive income Treasury stock Stockholders’ equity...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
is also a contra account to owner’s equity, because the drawing account’s debit balance is contrary to the normal credit balance for an owner’s equity account. At the end of the accounting year, the drawing...
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...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
income covers the same period of time as the income statement and consists of two major sections: Net income (or net earnings) from the company’s income statement Other comprehensive income, which consists of positive...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
... accrual cash 28. A more accurate measurement of a company’s net income during a short period of time is achieved under the__________ basis or method of accounting. Select... accrual cash 29. If the amount of...
results in all income statement amounts expressed as a percentage of net sales. VERTICAL TAIRLVCE Unscramble VERTICAL VITALREC Unscramble 9. __________-size balance sheets show all amounts as a percentage of total...
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