The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Balance Sheet Balance Sheet The balance sheet is also known as the statement of financial position and it is one of the five external financial statements issued by U.S. corporations. The balance sheet reflects the...
the month of January it had Maintenance Expense of $1,000 and that its current asset Prepaid Expense now has a debit balance of $11,000. For these amounts to be reported on its financial statements, the following...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
/ 3 years). This allocation of the phones’ cost to the accounting periods that benefit from the asset’s use follows the accountant’s matching principle. This makes the company’s financial statements more...
inventory items are moving between operations. As a result, large companies are likely to physically count the inventory items only at the end of the accounting year. Using the Quantities in the Company’s Inventory...
are the depreciation of the building, salaries of the company’s management, etc. For a company’s financial statements to have relevance they must be issued within several weeks after each accounting period ends. To...
prepares monthly financial statements. When the $2,400 payment is made on January 1, the company debits Prepaid Insurance and credits Cash. It also sets up automatic monthly adjusting entries to debit Insurance Expense...
to the financial statements of the parties to a noncancelable contract. Examples of No Entry When Signing a Contract Assume that an electric utility signs a noncancelable contract with a coal company to purchase 100...
the calculation and recording of depreciation, establishing allowances for uncollectible accounts, etc.). After making the adjusting entries, the accountant prepares the company’s financial statements (income...
not billed the supplier for the interest since it is not due until February 28. However, as of December 31, your company has earned $1,000 of interest (1/3 of $3,000). For the December financial statements to...
. In other words, the corporation has dividends in arrears of $60,000 (6% X $100 X 10,000). The preferred stock’s dividends in arrears must be disclosed in the corporation’s notes to its financial statements. This...
the expense reported on the income statement for the period when the expense was incurred and as a current liability on the end-of-the-year balance sheet. After the financial statements are distributed the adjusting...
statements also referred to as pro-forma financial statements Once prepared and approved, the budgeted amounts are used as a guide or road map in controlling the next year’s business activities. Example of Capital...
of directors will not declare a dividend they will be omitting. Therefore, the amount of these past omitted dividends that remain unpaid must be disclosed in the notes to the financial statements. The past omitted...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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...
disclosure required by Statement 33 was the reporting of the effects of general inflation as indicated by the change in the consumer price index. In other words, a large company had to disclose in the notes to its...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
is presented under the following headings: General information on the business, risk factors, and legal proceedings Management’s Discussion and Analysis of Results of Operations and Financial Condition Financial...
issued its Statement No. 151, which discusses the reporting of the fixed production overhead when less than normal capacity is utilized. The FASB’s Statements of Financial Accounting Standards are available at no cost...
Where can I find high quality business forms? AccountingCoach.com has developed 85 business forms to help you prepare financial statements, calculate financial ratios, break-even points, standard costing variances, and...
. General guidance for determining when revenues are earned can be found in paragraphs 83 and 84 of the FASB’s Statement of Financial Accounting Concepts No. 5, Recognition and Measurement in Financial Statements of...
to the broad underlying concepts which guide accountants when preparing financial statements. Principles of accounting can also mean generally accepted accounting principles (GAAP). In this context, principles of...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
would draw attention to the errors occurring when transactions were journalized, posted, account balances computed, etc. With accounting software, these clerical errors are unlikely.) Definition of Balance Sheet A...
for the company’s: Financial statements General ledger Cost accounting Payroll Accounts payable Accounts receivable Budgeting Special analyses as well as other duties At larger companies the controller may be assisted...
What is an adjusted trial balance? Definition of an Adjusted Trial Balance The adjusted trial balance is an internal document that lists the general ledger account titles and their balances after any adjustments have...
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...
What are adjusting entries? Definition of Adjusting Entries Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company’s financial statements comply with the...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
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