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...
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...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
What is an outlier? In cost accounting, an outlier could be a cost or its related level of activity that is out of line with other observations. An outlier can be detected by plotting each observation’s cost and...
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...
a stockholders’ equity account has increased, it will mean that cash was provided. Thus, the amount of the increase in stockholders’ equity will be reported on the SCF as a positive amount. For instance, if Common...
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...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
represents the cost which has not yet been depreciated. Example 1. A company purchases equipment at a cost of $100,000 and it is expected to be useful for 10 years. At the end of 10 years it will be scrapped for $0. A...
a reasonable range of activity. Learn more about fixed costs What is a variable expense? An expense is variable when its total amount changes in proportion to the change in sales, production, or some other activity....
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
. PERIOD PRDEOI Unscramble PERIOD EOIRPD Unscramble 6. The amounts earned from a company's main activities. REVENUES VNEERSEU Unscramble REVENUES UNEVRESE Unscramble 7. The costs that are matched with revenues....
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
will decrease as one learns or experiences the task. 16. The goal of target __________ is to reduce manufacturing costs so that a product can be priced competitively and yet be profitable. 17. A potential benefit of the...
Perhaps the most common example of the term amortization is the amortization schedule associated with a mortgage loan. For a 15-year mortgage loan with a fixed interest rate and monthly payments, the amortization...
What is the units of activity depreciation? Definition of Units-of-Activity Depreciation The units-of-activity depreciation is unique among the common methods of depreciation in that the useful life of the asset being...
, the amount of interest paid, and significant noncash investing and financing activities (such as issuing common stock in exchange for land) The statement of cash flows is important because investors, lenders, financial...
amount is reported as a liability. After the services are provided, an entry is needed to reduce the liability and to report the revenues. Note that a common characteristic of every adjusting entry will involve at least...
of details, but still has the correct balance for preparing the company’s financial statements. Example of Control Accounts A common example of a control account is the general ledger account entitled Accounts...
Are bonds payable reported as a current liability if they mature in six months? Definition of Bonds Payable Bonds payable are formal, long-term obligations that promise to pay interest every six months and the principal...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
is a temporary account that records the proprietor’s draws during the year. At the end of the year, the account’s debit balance will be closed to owner’s capital account A corporation will likely have the...
. Here are some transactions that will affect only the right side of the accounting equation. 1) A company refinances its short-term debt with long-term debt. Short-term liabilities will decrease and long-term...
but are not yet in the company’s records. A list of adjustments that are needed to the bank’s records. Common examples are the company’s outstanding checks and deposits in transit which are in the company’s...
on the bank statement. OUTSTANDING NUSAOTNGTID Unscramble OUTSTANDING GTDUNNASOIT Unscramble 2. Deposits made but not yet appearing on the bank statement are deposits in __________. TRANSIT TANTSIR Unscramble TRANSIT...
. (For an individual, the book balance is likely to be the balance appearing in the person’s check register.) It is common for the book balance to not agree with the balance on the bank statement as of the same day....
shares of common stock the number of issued and outstanding shares will increase. This increase will cause the previous stockholders’ ownership percentage to be reduced. Definition of Debt Financing Debt financing...
of accounting, turnover is used to express the rate at which a company has to replace the employees who leave the company. Examples of Turnover in Financial Ratios The following are a few of the most common financial...
. This is the reason for having an independent person prepare the bank reconciliation. Since electronic deposits and electronic withdrawals (charges) are so common, it is important that the bank reconciliation be...
statements that it has dividends in arrears. Dividends in arrears (and their current dividend) must be paid to the preferred stockholders before the common stockholders can be paid a dividend. When an annuity consists...
. Examples of Journal Entries Even with computerized accounting systems some general journal entries are necessary. Common general journal entries are the adjusting entries. For example, prior to issuing the company’s...
it indicates that the company has paid more than the amount owed, has made an incorrect entry, etc.) Equity accounts including the stockholders’ equity accounts Common Stock, Paid-in Capital in Excess of Par Value,...
. The monthly entry for $2,000 is often described as a deferral adjusting entry. Definition of Unrecorded Revenue Unrecorded revenue implies that the revenue has been earned, but not yet recorded in a company’s...
, it is common for half of the annual amount to be paid at the end of each 6-month period (semiannually). Generally, a bond’s stated interest rate is fixed (does not change) for the life of the bond. As a result, the...
What are the limitations of the payback period? Definition of Payback Period The payback period is a common (but not the best) tool for screening a company’s potential investments. It uses the potential investment’s...
Featured Review
"I am currently managing a family business in Thailand, which mainly concerns the import and export of frozen seafood. I became a PRO user after going through the first few chapters and finding the material to be comprehensive, answering all the questions I had as I read along and even the ones I didn't know I had. I like how detailed the material is, while still being digestible and not too time consuming. The examples later on encourage me to think about each problem as an accountant would based on what I've learnt. Since reading the first 10 chapters, I now already have an easier time making sense of financial statements issued within the company, to the point where I was able to help my accountant make decisions about how we should manage certain situations regarding intricacies of the factory. I wanted to thank AccountingCoach and the team responsible for putting this great content together as it has had a very positive impact on my life and career, and helped me make decisions with more competency and confidence." - Shahzil Y.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: