for each year of employment times the employee’s average monthly salary or wages during a three-year period prior to retirement. A hypothetical calculation for an employee retiring at age 65 might be 1% X 30 years of...
for each year of employment times the employee’s average monthly salary or wages during a three-year period prior to retirement. A hypothetical calculation for an employee retiring at age 65 might be 1% X 30 years of...
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...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
Is a prepaid expense recorded initially as an expense? Definition of Prepaid Expense A prepaid expense refers to an amount that a company has paid and a portion or all of it will be an expense in a later accounting...
, and the difference in their totals as of the final moment of an accounting period. The structure of the statement of financial position is similar to the basic accounting equation. For a corporation the format will be:...
is a debit to the income statement account Bad Debts Expense. Some companies might use the description provision for bad debts on its income statement in order to report the credit losses that pertain to the period of...
Receivable or Loans Receivable is decreased. Definition of a Loan Payment A loan payment (such as a monthly mortgage loan payment or a monthly car payment) consists of an interest payment for one month’s interest and...
What are some examples of financing activities on the cash flow statement? Definition of Financing Activities Financing activities reported on the statement of cash flows (SCF) involve changes to the long-term...
accounts to a balance sheet account such as a corporation’s Retained Earnings account When recording a reversing entry for a previous accrual adjusting entry involving an expense When recording a deferral adjusting...
that during a recent year a company’s income statement reported net sales of $2,100,000. During the same period, the company’s total assets reported on its 12 monthly balance sheets averaged $1,400,000. The...
. After a period of time, the public utility will refund the customer’s utility deposit. Example of Recording a Deposit on Utilities Assume that a new business is required to pay $500 as a security deposit to an...
A term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
in a logical manner for the following reasons: the portion of the lump sum cost that is recorded in the Land account will not be depreciated the portion of the lump sum cost that is recorded in the Buildings account...
What are gross sales? Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the total will be adjusted to the...
What is recorded in the Wages and Salaries Expense account? Definition of Wages and Salaries Expense The account Wages and Salaries Expense (or separate accounts such as Wages Expense or Salaries Expense) are used to...
How is working capital defined and measured? Definition of Working Capital Working capital is defined as the amount of a company’s current assets minus the amount of its current liabilities usually as of the final...
in arrears also requires a disclosure in the notes to the financial statements. Arrears is also used in the context of annuities. When an annuity’s equal payments occur at the end of each period, the annuity is said...
What is the consistency principle? Definition of Consistency In accounting, consistency requires that a company’s financial statements follow the same accounting principles, methods, practices and procedures from one...
in order to report this person as an asset owned by the entity. The salary and bonuses paid to a key employee are reported as expenses in the period in which the employee performed services. Not being able to record a...
be referred to as a deferred charge. Example of a Deferred Asset Assume that an electric utility spent $300,000 for a project before it had to be abandoned. The state regulators ruled that the utility may recover the...
statement’s heading indicates a period of time (or time interval) such as the year ending December 31? Select... Balance sheet Income statement 3. Total revenues minus total expenses is __________. Select... gross...
. Which type of journal entries are made at the end of each accounting period so that the financial statements better reflect the accrual method of accounting? Adjusting Right! Closing Wrong. Reversing Wrong. 3. The...
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...
of prepaid insurance that has expired in the accounting period is reported as an _____________. EXPENSE XEPSENE Unscramble EXPENSE SXNPEEE Unscramble 6. A credit entry will cause the Cash account balance to...
of depreciation, while the “declining balance” refers to the asset’s book value or carrying value at the beginning of the accounting period. Since book value is an asset’s cost minus its accumulated...
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...
has credit terms of 2/10, net 30. The invoice is for $1,000 but $100 of the goods were returned within two days as instructed by the supplier. The amount to be remitted to the supplier within the discount period is...
or dates appearing in the heading of the statement of cash flows will be similar to which of the following financial statements? Select... Balance sheet Income statement View Coaching The statement of cash flows reports...
of financial position is another name for the balance sheet and it reports a company's assets, liabilities, and owner's (or stockholders') equity usually at the final moment of the accounting period. 2....
Entity Wrong. The economic entity assumption involves keeping the owner's personal transactions separate from the business transactions. Going Concern Right! This is the correct answer. Time Period Wrong. The time...
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...
the period of time shown in the heading of the income statement. The period of time (or time interval) could be a year, quarter, five months, one month, 52 weeks, 4 weeks, etc. If the corporation’s shares of common...
If the amount of the discount or the premium on bonds payable is not significant, the corporation may amortize the discount or premium using the straight-line method of amortization. This means that each accounting...
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...
-in capital and deferred revenues Retained earnings and net income Paid-in capital and retained earnings 16. A new corporation’s first transaction involves earning service fees from a client. The client is allowed to...
up during the current accounting period. expenses These costs are reported on the income statement because they are caused by the revenues, or they were used up during the current accounting period. Mark as wrong Mark...
insurance is known as a __________-type or prepayment-type adjusting entry. 3. Adjusting entries are usually dated as of the __________ day of the accounting period. 4. An adjusting entry usually involves an __________...
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