and reduces a company’s net income. However, the interest paid also causes a change in the company’s balance sheet and statement of cash flows. Reporting Interest Paid on the Statement of Cash Flows In the statement...
and reduces a company’s net income. However, the interest paid also causes a change in the company’s balance sheet and statement of cash flows. Reporting Interest Paid on the Statement of Cash Flows In the statement...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
of a company’s revenues, expenses, gains, losses, and the resulting net income that occurred during a year, quarter, or other period of time. Examples of Items Appearing in the Income Statement The main items reported...
of comprehensive income along with the amount of net income from the income statement. Since the OCI items do not affect the net income, they do not cause a change in a corporation’s retained earnings. Instead, the...
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...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
by reading our Manufacturing Overhead (Explanation). 1. Selling, general and administrative costs are part of manufacturing overhead. True Wrong. SG&A costs and interest expense are reported as expenses on the...
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...
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...
the interest on its debt even if its earnings were to decrease. A small interest coverage ratio sends a caution signal. Example of Interest Coverage Ratio Assume a corporation’s most recent annual 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...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
format? Single-step Wrong. There is no subtotal in the single-step income statement. Multiple-step Right! It will appear as the result of subtracting the cost of goods sold from net sales. 8. Which income statement...
specifies a __________. Select... period of time point in time 8. Under the indirect method, an increase in accounts receivable will be __________ __________ net income in the operating activities section of the...
income statements. interim income statements These income statements are issued for periods other than the official annual income statements. An example is the quarterly income statements. Mark as wrong Mark as right...
What is accumulated other comprehensive income? Definition of Accumulated Other Comprehensive Income Accumulated other comprehensive income is a separate line within the stockholders’ equity section of the balance...
Net income divided by net sales.
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
accounts such as Accounts Payable, Notes Payable, Accrued Liabilities, Deferred Income Taxes, etc. Owner’s (Stockholders’) equity accounts including Owner’s Capital, Common Stock, Retained Earnings, and others...
is the calculation for the __________ ratio. 3. A common-size balance sheet is prepared by dividing all of the dollar amounts by the amount of total __________. 4. A common-size income statement is prepared by dividing...
An income statement that has more than one subtraction in arriving at net income. An income statement showing gross profit is an indication it is a multiple-step income statement.
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
of the manufacturing costs are not directly traceable to individual products and will need to be allocated to them. Examples of indirect manufacturing costs include the rent, property taxes, depreciation, heat,...
(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....
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...
Financial Statements Video Training Part 10 Income statement: formats (multiple-step, single-step, comparative, amounts as % of net sales) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
truck, and the truck’s carry amount (book value) at the time of the sale was $600, the company will have a gain of $2,400. Definition of Income Non-accountants might use the term income instead of the word revenue....
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
What is net realizable value? Definition of Net Realizable Value Net realizable value (NRV) is the cash amount that a company expects to receive. Hence, net realizable value is sometimes referred to as cash realizable...
amount of debt in relationship to owner’s equity. 16. In financial ratios, debt refers to the total amount of __________. 17. In the vertical analysis of a retailer, each amount on its income statement will be divided...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
What is capex? Definition of Capex Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following: Actual amounts that were spent during...
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