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...
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...
3. A customer’s check dated June 27 was received by XYZ Corp. on June 30 and was deposited on July 2. The amount of the check should be included in XYZ’s cash balance as of the following date: __________. 4....
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
for remitting two times the amount withheld from its employees. For the calendar year 2022, the FICA withholding consists of: The Social Security tax of 6.2% withheld from the first $147,000 of each employee’s...
of an Expense Accrual The accrual of an expense or an expense accrual refers to the reporting of an expense and the related liability in an accounting period that is prior to the period when the amount will be paid or...
year 2022, the Social Security payroll tax rate of 6.2% is applied to each employee’s earnings up to the maximum of $147,000. The amount withheld from employees is then matched by the employer. As a result, the total...
What are phantom profits? The terms phantom profits or illusory profits are often used in the context of inventory (but can also pertain to depreciation) during periods of rising costs. The amount of phantom or illusory...
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...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
. 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...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
statements from June through August and make a list of the check numbers that had been written after June 1, but had not appeared on any of the bank statements from June through August. Next to each check number write...
! Owner's (Stockholders') Equity is not involved in this transaction. 6. The company purchases equipment with its cash. Assets Increase The asset Equipment will increase. However, the asset Cash will decrease...
in Allowance for Doubtful Accounts reduces the amount reported on a company’s balance sheet for accounts receivable to the amount that is expected to be collected. The balance sheet account Allowance for Doubtful...
What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
of the common budgeting practice of accepting the past level of an expense and adjusting that amount for the new budget, ZBB starts with $0 and requires that every dollar must be justified to be included in the new...
What is an account payable? Definition of an Account Payable An account payable is an amount owed to a supplier or vendor for goods or services that were provided in advance of payment. However, some people use the term...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
continuous financial statement.) The amount of net income will cause an increase in the stockholders’ equity account Retained Earnings, while a loss will cause a decrease. The amount of other comprehensive income will...
What is a credit balance? Definition of Credit Balance In accounting and bookkeeping, a credit balance is the ending amount found on the right side of a general ledger account or subsidiary ledger account. Examples of...
. As the prepaid amount expires, the company will reduce the asset account Prepaid Insurance with a credit entry and will debit Insurance Expense. (If the company arranges for its insurance premiums to be paid monthly,...
rate The three product costs are used for calculating the cost of goods sold and the cost of the various inventories. If there is a difference between the total amount of overhead costs applied to the products and the...
of Bank Balance When a company receives its checking account statement from its bank showing June’s activity, the ending balance on June 30 is the bank balance. (Generally, this bank balance will not agree with the...
What is turnover? Definition of Turnover In accounting, the term turnover can have more than one meaning. In some countries turnover is used in place of sales. Turnover also pertains to certain financial ratios that...
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
What is the production volume variance? Definition of Production Volume Variance The production volume variance is associated with a standard costing system used by some manufacturers. This variance arises when there is...
What is the difference between assessed value and appraised value? Definition of Assessed Value Assessed value will likely be the amount that a local or state government has designated for individual properties. This...
What is a deferral? Definition of Deferral A deferral often refers to an amount that was paid or received, but the amount cannot be reported on the current income statement since it will be an expense or revenue of a...
. Software, financial calculators, and online calculators provide a quicker and more accurate answer. Definition of NPV The net present value (NPV) method or model discounts all of the cash inflows and outflows by a...
Activities When a company borrows money for the short-term or long-term, and when a corporation issues bonds or shares of its common or preferred stock and receives cash, the proceeds will be reported as positive...
. Others use the term debt to mean only the formal, written loans and bonds payable. Examples of Debt As an example of debt meaning the total amount of a company’s liabilities, we look to the debt-to-equity ratio. In...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
for the cost of $10,000 Credit the asset account Cash for the $4,000 that was paid Credit the liability account Notes Payable for $6,000 The liability account Notes Payable reports the principal amount owed at the...
balance sheet as either a current liability or a non-current (or long-term) liability. Examples of Creditors Some creditors, such as banks and other lenders, have lent money to the company and will require the company...
with the net income of $22,000. Next, the depreciation expense of $8,000 is shown as a positive amount and is added to the net income to arrive at $30,000, which equals the cash receipts of $100,000 minus cash expenses...
, 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...
, if a company receives $1,000 today and is able to invest the amount immediately at a rate of 10% per year, the company will have $1,100 after 365 days. If the time value of money is 10%, it also means that receiving...
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...
, our Net Sales and our weekly profit, I immediately made an entry to debit Discount for Shrinkage (a contra account to Sales) and a credit to Provision for Discounts (a contra account to Accounts Receivable). By...
, the written note specifies the principal amount, the date due, and the interest to be paid. For most companies, if the note will be due within one year, the borrower will classify the note payable as a current...
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