to the present. The further into the future, the bigger the discounting. This means that the present value for distant amounts will be relatively minor in amount. Even if it is difficult to predict the near future, you...
to the present. The further into the future, the bigger the discounting. This means that the present value for distant amounts will be relatively minor in amount. Even if it is difficult to predict the near future, you...
. Definition of Expenditure An expenditure is a payment or disbursement. The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be payment in the same...
are not allocated to the products, the company must have its selling prices and sales revenues sufficiently large to cover both the product costs and the period expenses to have a positive amount of net income. Join PRO...
the average amount of inventory throughout the entire year since using only the end-of-the-year amounts may result in a much lower average. Example of Inventory Turnover Ratio To illustrate the inventory turnover ratio,...
What is a credit memo? Definition of Credit Memo One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. Another type of credit memo, or...
to increase on January 1, 2020 to $684 per week. For a full-year employee, this means the current annual amount of $23,660 ($455 X 52 weeks) will become $35,568. You should refer to both the U.S. Department of Labor...
a debit entered on the left side of a general ledger account. (There will also need to be a credit amount entered on the right side of another account.) The abbreviation for debit is dr. (which is also related to the...
of Accounts Payable. If a company owes for goods and services but the amounts are not yet recorded in Accounts Payable as of the end of each accounting period, the amount must be recorded with an adjusting entry. The...
(Based on Pay Dates) The retailer’s payroll department must report to the IRS the wages paid. Therefore, the amount reported to the IRS is based on the pay dates. Since January 4 is the first time the employees will...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
: Sales for the year $800,000; Cost of Goods Sold for the year $600,000; Inventory (average amount at cost during the year) $200,000. Inventory Turnover Ratio = $600,000 divided by $200,000 = 3 times. On average the...
What is an asset's useful life? Definition of Asset’s Useful Life An asset’s useful life is the estimated period of time (or total amount of activity) that a long-lived asset will be economically feasible for...
if the reconciliation is done by someone other than the person handling and/or recording receipts and payments. Having this additional person prepare the bank reconciliation reduces the odds of an improper use of...
What is the difference between notes payable and notes receivable? Definition of Notes Payable and Notes Receivable Notes payable and notes receivable are both associated with a written note that promises to repay the...
salaries for the company’s marketing team should be reported as an expense in June since the future economic value cannot be measured/determined. Another example is the amount spent to repair equipment that broke...
the $10,000 liability and causes a $10,000 credit balance in Interest Expense. The negative amount in Interest Expense will disappear when the actual interest expense is recorded in January. Join PRO to Track Progress...
is that the amount is objective, unbiased, verifiable, and therefore easily audited. The reason is that there will be lots of documentation such as contracts, invoices, payments, transfer taxes, and so on. On the other...
. Hence, both presentations show the cost of goods sold of $990. Recap Again, inventory is a current asset that is reported on the balance sheet. The change in inventory is used to adjust the amount of purchases in order...
the required amount of college credits, many students enroll in a CPA Review course just prior to sitting for the CPA Exam. Within AccountingCoach.com’s Accounting Career Center we provide othe assistance and links...
is debited under the allowance method. The use of Allowance for Doubtful Accounts allows us to see in Accounts Receivable the total amount that the company has a right to collect from its credit customers. The credit...
The composition of the current assets is also an important consideration. If the current assets are predominantly in cash, marketable securities, and collectible accounts receivable, that is likely to provide more...
Discount The company selling the product (and the buyer of the product) will record the transaction at the amount after the trade discount is subtracted. For example, when goods with list prices totaling $1,000 are sold...
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
sheet as part of the current asset cash. (A bank’s balance sheet lists the total amount of its customers’ checking account balances as a current liability.) As part of its internal controls, a company should...
, which is the net amount of the revenues, expenses, gains, and losses being reported. Example of Profit and Loss Statement The following is an example of the key elements of a profit and loss statement, which officially...
What is not sufficient funds? Definition of Not Sufficient Funds Not sufficient funds or NSF or insufficient funds is a term to describe a check that has been returned by the bank because the balance in the checking...
to the condo project. Hence the drop ship allows XYZ to avoid some expensive non-value-added activities. When Premier ships the water heaters, it will bill XYZ and will send the invoice to XYZ. As a result XYZ will have...
What is an equivalent unit of production? Definition of Equivalent Unit of Production An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially...
report a corporation’s assets as dollar amounts (rather than reporting details of all of the assets). If an asset cannot be expressed as a dollar amount, it cannot be entered in a general ledger account. For example,...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
a debit balance equal to the cost of the repurchased shares being held by the corporation. The corporation’s cost of treasury stock reduces the corporation’s cash and the total amount of stockholders’ equity. The...
will never receive more than $8 per share no matter how successful the corporation becomes. The preferred stock could have any of the following features: cumulative, convertible, callable, participating, and more. Since...
Receivable.) Assume the company had a $10,000 plumbing repair done on May 31 and is told the amount will be $10,000 but the bill will not be received until June 3 and payment will be due on June 13. On May 31, the...
What does it mean to recognize an expense? Definition of Recognize an Expense To recognize an expense means to report the proper amount of an expense on the income statement for the appropriate accounting period. When...
the payee $124, the company should contact the the payee to cash the check. (If the check is not cashed within a certain number of years, the company will have to remit the amount of the uncashed check to its state...
cost (had FIFO been used) and the LIFO cost. Definition of Provision The term provision is sometimes used by corporations when reporting an expense that is an estimated or uncertain amount. Two examples include...
a company does self-insure, it will report its actual losses in the accounting period in which the losses occur. This may result in huge losses in some years and no losses in other years. (On the other hand, if a...
What is accrued income? Definition of Accrued Income Accrued income is an amount that: A company has earned The company has a right to receive The collection is probable Has not yet been recorded in the general ledger...
the amounts established at the time that the static budget was prepared and approved.) For costs that vary with volume or activity, the flexible budget will flex because the budget will include a variable rate per unit...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
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