the assets' costs to the periods used View Coaching The main purpose of depreciation is to spread or allocate the cost of buildings and equipment to expense in a systematic and rational manner. For the financial...
the assets' costs to the periods used View Coaching The main purpose of depreciation is to spread or allocate the cost of buildings and equipment to expense in a systematic and rational manner. For the financial...
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.
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
as opposed to a partnership form is the ease of transferring __________ ownership. 3. At a corporation, Assets minus Liabilities is __________ Stockholders' Equity. 4. Shares of stock that have been issued and have...
. There is no regulation that requires the tax depreciation to be the same as the book depreciation in a given year. (However, over the life of an asset, the total depreciation expense for both will be limited to the...
Unscramble 4. The type of account involved with the deferral of revenues. LIABILITY IBLLIITAY Unscramble LIABILITY AIBTLIILY Unscramble 5. This type of account is part of the entry to accrue revenues. ASSET ETASS...
Unscramble 3. Land is an asset that is not ____________________. DEPRECIATED EIEAPECRDTD Unscramble DEPRECIATED EIEEACRDTPD Unscramble 4. An asset's book value is its cost minus its __________________ depreciation....
What if a company's Allowance for Doubtful Accounts is understated? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account. The Allowance account’s credit...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
our Break-even Point (Explanation). 1. Fixed Expenses do not change in total when there is a modest change in sales. True Right! The total of a fixed expense is indeed fixed (does not change) as the volume increases or...
What is a static budget? Definition of Static Budget A static budget is a budget in which the amounts will not change even with significant changes in volume. In contrast to a static budget, a company’s sales...
manufacturing and increased demands from customers, direct labor is no longer the main cost driver of indirect manufacturing overhead. In addition to direct labor, today’s drivers of indirect manufacturing costs...
software may allow you to go into a previous period’s (as well as the current period’s) activity and remove a voided check or change the amount to zero. This will also increase the balance in the Cash account and...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
increasing from 200,000 shares to 400,000 shares.” Since a stock split does not change the balance in the Common Stock account, a complete journal entry was not required. The memorandum entry merely notes for future...
. Fixed overhead costs are the indirect manufacturing costs that are not expected to change when the volume of activity changes. Some examples of fixed manufacturing overhead include the depreciation, property tax and...
estate are known as __________ bonds. 15. Bonds that are not secured by specific assets are known as __________. 16. The document that specifies the terms of a bond is the bond __________. 17. A fund that contains cash...
Net income divided by net sales.
. The reason is that expenses will cause a decrease in stockholders' (or owner's) equity. Credit Wrong. 4. What type of accounts are Interest Receivable and Fees Receivable? Asset Right! Receivables are asset...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
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...
What is gross profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Gross profit is sometimes referred to as gross margin. (However, gross margin can also mean the gross...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
The owner’s equity account that contains the amount invested in the sole proprietorship by Matt Jones plus the net income since the company began minus the draws made by Matt Jones since the company began. The...
The owner’s equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The...
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
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 the net amount will also be reported. The net amount is often referred to as the carrying amount or perhaps the net realizable amount. Examples of Contra Accounts To illustrate, let’s use the contra asset account...
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,...
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
for the company to recoup its investment. Example of Payback Period Assume a company invests $100,000 in a project that is expected to have the following positive net cash inflows: $30,000 in Year 1 $40,000 in Year 2...
to mean all forms of taxable compensation including wages, salaries, tips, commissions, bonuses, etc. Gross Wages vs Net Wages If an employee works 40 hours during the week of December 25-31 and earns $20 per hour, the...
on its investments. The investment interest and dividend amounts earned will be reported on the income statement as other income. To provide more clarity, accountants use the term net income to describe the amount...
that nearly all large U.S. corporations use the indirect method. Example of the Indirect Method of SCF When the indirect method of presenting a corporation’s cash flows from operating activities is used, this section...
describes an __________. 3. Methods that compute the present value of future cash flows are referred to as __________ cash flow techniques. 4. Part of the difference between a company’s net income during a specific...
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
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