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...
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 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 Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on 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...
How can I learn bookkeeping? You can learn bookkeeping at no cost on our website AccountingCoach.com. We recently expanded our Explanation of Bookkeeping, and we have many other topics that are relevant including debits...
with the costs of direct labor and manufacturing overhead) A prime cost The costs of direct materials are reported in the financial statements based on where they are: Raw materials not yet in production are...
. Basically, the bank reconciliation compares the amounts in a company’s accounting records with the amounts in its bank’s records. Any differences are reconciled (explained) so that improper amounts will be exposed...
How can I learn bookkeeping at a low cost? You can use the Internet to learn bookkeeping at little or no cost. For example, at no cost you can read clear explanations of debits and credits, adjusting entries, financial...
. Examples for Using T-Accounts I regularly use T-accounts when preparing adjusting entries (accruals and deferrals). I begin by drawing two T-accounts, marking one as the balance sheet account, and one as the income...
accounts: assets, liabilities, stockholders’ equity Income statement accounts: operating revenues, operating expenses, other revenues and gains, other expenses and losses The balances and activity in the general...
costs. In turn, management can take action to correct the problems, seek higher selling prices, etc. Since the company’s external financial statements must reflect the historical cost principle, the standard costs in...
. 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...
$100 check and will be accountable for the $100. At all times the custodian must have a combination of cash and petty cash vouchers/receipts which add up to $100. This is referred to as an imprest petty cash fund....
the December 31 financial statements: The tenant will debit Rent Expense for $1,000 and will credit Rent Payable for $1,000 The landlord will debit Rent Receivable for $1,000 and will credit Rent Revenues for $1,000...
variances and will be recorded in separate variance accounts. Any balance in a variance account indicates that the company is deviating from the amounts in its profit plan. While standard costs can be a useful...
is more subjective and could lead to some exaggerated amounts. Outside of the financial statements amounts, companies could get estimated current or replacement values from appraisers. Join PRO to Track Progress Mark...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
mean a corporation’s net income after income tax expense. Many business owners refer to the company’s income statement as the profit and loss statement or the P&L. A company reporting a positive amount of net...
with accrual adjusting entries by the borrower and the lender before issuing their financial statements. The borrower’s adjusting entry will debit Interest Expense and credit Accrued Interest Payable (a current...
Allowance for Doubtful Accounts. While the allowance account is recommended for the company’s financial statements, it is not acceptable for income tax purposes. Example of the Allowance for Doubtful Accounts Let’s...
of Public Accounting Services The services provided by public accounting firms vary by the size and the expertise of the firm. Here are some of the public accounting services: Preparation, review, and auditing of the...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
December. On its December 31 balance sheet, the retailer must report the amounts it owes to the utilities as of December 31. If the utility bills for December’s usage are not available at the time that the...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
to be employed at a larger company and will be able to delegate the processing of the high-volume routine transactions to accounting clerks. In turn, the accountant will deal with more complicated transactions, will...
the debtor pays the amount owed. A lien on a company’s assets should be disclosed in the company’s notes to the financial statements. Examples of Liens The following are examples of liens: A bank lends a retailer...
with an accrual adjusting entry prior to issuing the financial statements. Example of Accrued Income One example of accrued income is the interest a company earns on a bond investment. To illustrate, let’s assume that...
, but will not recognize the variety of activities and efforts that occur with different products. The traditional method may have been reasonable or at least sufficient for the company’s external financial statements...
accounts, but with differing amounts. Recurring journal entries may also be referred to as memorized journal entries or standard journal entries. Examples of Recurring Journal Entries A company that prepares monthly...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
or LIFO, but require the same cost flow assumption be used on both the company’s tax return and on the company’s financial statements. With inflation being the norm, profitable companies using LIFO are matching the...
external financial statements. Example of Rent as a Product Cost If a manufacturer rents its manufacturing facilities and equipment, the rent is a product cost (as opposed to an expense of the period). That is, the...
that it leases from the owner (lessor). The lease states that all improvements to the building will belong to the owner of the building. If the walls and offices cost $90,000 and are expected to be useful for 15 years,...
accounts. This also facilitates the electronic preparation of the company’s financial statements. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
accounts. The amounts and balances in the general ledger accounts are used to prepare the company’s financial statements. Example of General Journal and General Ledger Assume that a company depreciates its equipment...
What is the difference between adjusting entries and correcting entries? Definition of Adjusting Entries Generally, adjusting entries are required at the end of every accounting period so that a company’s financial...
contingent liabilities and their related contingent losses are: Recorded with a journal entry Are limited to a disclosure in the notes to the financial statements Not recorded or disclosed We have another Q&A that...
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