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...
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...
, 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...
and paid by the corporation. Here are a few of the more common descriptions that will be seen under the direct method: Cash from customers Cash paid to employees Cash paid to suppliers Cash paid for interest The direct...
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...
. 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...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
not involve a cash payment. As a result, a statement of cash flows prepared under the indirect method will add back the depreciation expense that had been deducted on the income statement. Methods for Computing...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
. Accountants will state that the goods produced must absorb the fixed manufacturing overhead costs. It is common that the fixed manufacturing overhead costs are absorbed by the goods produced (or are...
with the accrual basis of accounting Fixed asset accounting Cost accounting Budgeting and profit planning, and more Common titles for accountants include corporate accountant, chief accountant, controller, assistant...
What is the difference between liability and debt? Definition of Liability In accounting and bookkeeping, the term liability refers to a company’s obligation arising from a past transaction. Examples of Liabilities A...
What are gross wages? Definition of Gross Wages Gross wages are the amounts earned by employees before the payroll withholding taxes and other deductions are subtracted. Sometimes gross wages is used to describe 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...
. The most common responsibility centers are the numerous departments within a company. Examples of Responsibility Centers Responsibility centers are often categorized by the degree of authority and responsibility given...
is credited to this account and then amortized with a credit to interest expense over the life of the bonds. Mark as wrong Mark as right straight-line amortization This is a common method for systematically moving bond...
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...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
that the corporation has a separate general ledger cash account for each of its bank checking accounts. It is unusual for the balance in the bank account (balance per bank) to be the same as the balance in the...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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...
Statement Assume that an online seller begins operations on January 2 by purchasing $5,000 of goods consisting of 1,000 at a cost of $5 each. The goods are going to be sold for $12 each. There are two common ways to...
service, etc. When deciding which of the non-necessary projects should be undertaken, companies likely use various techniques for ranking the projects from a financial point of view. The following are four common...
of processes. When there is a series of processes, each process is likely to occur in a separate production department or cost center. Common examples of production departments include: casting molding forming cutting...
What should be the entry when goods are purchased at a discount? Definition of Goods Purchased at a Discount There are two common types of discounts for companies buying goods to resell: Trade discount Early payment...
in inventory). Cost Flow Assumption Is Needed When costs change during the accounting period, a cost flow will have to be assumed. Some common cost flow assumptions include FIFO, LIFO, and average. Join PRO to Track...
the cash is received, after the cash is received, or at time that the cash is received. (Note that for income tax reporting, smaller companies may use the cash basis of accounting.) Examples of Revenue Common examples...
, when the invoice is to be paid, a detailed listing of the goods and/or services, the amount owed for each item, and the total amount of the invoice. Some common invoice payment terms are: Due upon receipt Net 30...
statement Focusing on the balance needed in Allowance for Doubtful Accounts (which will be reported on the balance sheet) Examples of Allowance Method Let’s assume that a corporation begins operations on November 1 in...
minus the costs of completion, disposal, and transportation. Mark as wrong Mark as right gross profit method A common technique for estimating the cost of a company’s ending inventory. gross profit method A common...
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...
type of account? Select... Current asset Current liability Income statement 25. If a U.S corporation’s shares of stock are traded on a stock exchange, which report will contain management’s discussion of 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...
by corporations whose stock is publicly traded. SEC (or) Securities and Exchange Commission This U.S. government agency has regulatory authority over the reporting by corporations whose stock is publicly traded. Mark as...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
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