of operating income is shown. As a result, the income statement allows for an easy comparison of the operations and profitability of companies regardless of their debt and interest expense. Join PRO to Track Progress...
of operating income is shown. As a result, the income statement allows for an easy comparison of the operations and profitability of companies regardless of their debt and interest expense. Join PRO to Track Progress...
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 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 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 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...
the insurance premiums expire. (However, the insurance premiums for the manufacturing operations will become part of the product costs as the insurance premiums expire.) Join PRO to Track Progress Mark the Question as...
of accounts is helpful for identifying the accounts to be used when encountering less frequent transactions. The chart of accounts and the general ledger accounts can also be modified to provide more detailed...
information on the company’s operations and financial position. Unlike the annual financial statements, the interim financial statements will likely be unaudited and either condensed or more detailed depending on the...
that a company uses the accrual basis of accounting. In its first month of operations, it provides $10,000 of services to its clients and allows them to pay 30 days later. It also incurs $2,000 of expenses of which it...
. These situations will likely prevent the manufacturer from achieving significant sales at selling prices that are based on costs plus a desired profit. Given the complexity of a manufacturer’s operations and the...
as the asset Propane Inventory. As the propane is sold, the dealer will reduce Propane Inventory for the cost of the propane sold and will increase the expense Cost of Goods Sold. Example 3. A manufacturer uses propane...
What is the difference between actual overhead and applied overhead? Definition of Actual Overhead In the context of actual and applied overhead, actual overhead refers to a manufacturer’s indirect manufacturing costs....
costs are the raw materials, labor, and manufacturing overhead used to produce the goods. Think of product costs as clinging to the goods produced. The rent associated with the manufacturing operations is part of...
to the financial statements is usually a summary of the company’s significant accounting policies for the use of estimates, revenue recognition, inventories, property and equipment, goodwill and other intangible...
for controlling operations, and estimating selling prices when quoting prices for new work. Other Examples of Accounting Some of the many other examples of accounting include: Advising on accounting systems Income tax...
of Utility Bills Let’s assume that a retailer begins operations on December 1 and it uses natural gas for heating and it uses electricity for lighting and to operate its computers and equipment. Let’s assume that...
is $400,000 and is expected to process 50,000 identical units of product. Some companies will develop standard costs for controlling its operations. For example, the standard cost of processing all identical units in...
the financial statements with the management and owners of the company. The accountant will also be involved in budgeting of operations and capital improvements, cost accounting, reports to government agencies, and...
What are capital expenditures? Definition of Capital Expenditures Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital...
What is manufacturing overhead and what does it include? Definition of Manufacturing Overhead Manufacturing overhead (also known as factory overhead, factory burden, production overhead) involves a company’s...
activities. The combination of the cash inflows and the cash outflows from a company’s operations (activities outside of its investing and financing activities). loss on disposal, net of tax. An accounting loss on the...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
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...
($1,000 each month) for 10 years. Assume that another company purchases equipment for $20,000 that will be useful for producing a total of 20,000 items. If in the first year of operations the company produces 1,800...
and distribute to its stockholders, the following corporation information should be considered: Present cash balance Cash needed to finance the business operations (growth, inflation, etc.) Cash needed to finance future...
What is the income statement? Definition of Income Statement The income statement is also known as the statement of operations, profit and loss statement, and statement of earnings. It is one of a company’s main...
What is budgeting? Definition of Budgeting Budgeting is the process of preparing detailed projections of future amounts. Companies often engage in two types of budgeting: Operational budgeting, and Capital budgeting...
(a noncurrent or long-term asset). The total cost will then be depreciated over the building’s useful life. (On the other hand, interest to finance the company’s operations or to build equipment is not capitalized....
to increase the total amount of its fixed costs . Example of Relevant Range Let’s assume that a manufacturer’s monthly production volume is consistently between 10,000 to 13,000 units of product requiring between...
financial statements of a U.S. corporation consist of a complete set of the following: income statement (statement of earnings, statement of operations) statement of comprehensive income balance sheet (statement of...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
What does an accountant do? Some accountants are directly involved in preparing an organization’s financial statements. This is likely to include maintaining the general ledger and supervising some employees. Other...
What is the profit and loss statement? Definition of Profit and Loss Statement The profit and loss statement, or P&L, is a name sometimes used to describe a company’s income statement, statement of income,...
of machine hours. Example of Fixed Overhead Absorbed Assume that TOPCO has budgeted next year’s fixed manufacturing overhead costs to be $2,000,000 (consisting of depreciation on its equipment, salaries of the...
method of accounting) begins operations on December 27. The employees working from December 27 through December 31 will receive their first paychecks on January 4. If the employees earn a total of $5,000 of wages during...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
Financial Statements Video Training Part 12 Statement of cash flows: introduction, cash flows from operating activities Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
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...
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