Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The surcharges...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
What is lead time in purchasing? In purchasing, lead time is the estimated time between ordering goods and receiving the goods. For instance, if 100 units of Product X are ordered on April 11 and are expected to be...
as of the date of the bank statement, but were not deposited in time for them to appear on the bank statement Bank errors which resulted in too much withdrawn from the bank account or too little added to the bank...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
. If any of the items recorded in Sundry Expenses begin to occur frequently and/or become significant, a new account should be opened for such items. Sundry expenses could also refer to a line on a company’s...
How do I determine my payroll tax liabilities? Your payroll tax liabilities will include the following: Federal, state, and local income taxes withheld from employees’ wages, salaries, bonuses, etc. but not yet...
Which accounts normally have debit balances? Definition of Debit Balance In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by...
What is materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
with the principal balance in the lender’s records. This can be confirmed on a loan statement from the lender or by asking the lender for the principal balance. Join PRO to Track Progress Mark the Question as Read...
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
What is annualizing? Definition of Annualizing Annualizing means taking a partial year amount and converting it to a full year amount. We will use several examples to illustrate how this works. Examples of Annualizing A...
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
What is the definition of capital market? Often, capital market refers to the structured market for trading stocks and bonds. Examples are the New York Stock Exchange, the American Stock Exchange, NASDAQ, and the New...
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
, is now on the bank statement, but it is not in the cash account. Therefore, you need to put the check amount into the general ledger. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
What is a suspense account? Definition of Suspense Account A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
. Definition of Rent Revenue Rent Revenue is the title of an income statement account which (under the accrual basis of accounting) indicates the amount of rent that has been earned during the period of time indicated in...
What are invoice payment terms? Definition of Invoice Payment Terms Invoice payment terms appear as part of the information shown on the invoice (or bill) prepared by a seller of goods or a provider of services....
as follows: Credit to its Land account for its cost of $200,000 Debit to its Cash account for the $500,000 it received Credit to the income statement account Gain on Sale of Real Estate for $300,000 Join PRO to Track...
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
Is AccountingCoach.com based on GAAP or IFRS? The materials presented on AccountingCoach.com are based on U.S. GAAP. Since the accounting materials on AccountingCoach.com are generally introductory concepts, the...
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
What is gross pay? Definition of Gross Pay Gross pay is the amount an employee is paid before the employer withholds FICA (Social Security and Medicare payroll taxes), income taxes (federal, state, local) if applicable,...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
What is the difference between the terms capitalize and depreciate? Definition of Capitalize In accounting, the term capitalize refers to adding an amount to the balance sheet as an asset (as opposed to immediately...
How do I write off old outstanding checks? Definition of an Old Outstanding Check We will assume that an outstanding check has appeared on the outstanding check list that is part of the company’s bank reconciliation...
What is premium on bonds payable? Definition of Premium on Bonds Payable Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. This is...
What are some examples of financing activities? Definition of Financing Activities Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
on a multiple-step income statement prior to deducting selling, general and administrative expenses and prior to nonoperating revenues, nonoperating expenses, gains and losses. Example of Gross Profit Let’s assume...
reconciliation the outstanding checks are a deduction from the bank balance (or balance per the bank statement). If an outstanding check from the previous month did not clear the bank account in the current month, the...
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