Someone who performs a task for a company, but is not an employee. The IRS has criteria to assist in distinguishing between an independent contractor and an employee.
Someone who performs a task for a company, but is not an employee. The IRS has criteria to assist in distinguishing between an independent contractor and an employee.
What is cash from operating activities? Definition of Cash from Operating Activities Cash from operating activities usually refers to the first section of the statement of cash flows. Cash from operating activities...
What are the notes to the financial statements? Definition of Notes to Financial Statements The notes to the financial statements are a required, integral part of a company’s external financial statements. They are...
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What is obsolete inventory? Definition of Obsolete Inventory Obsolete inventory refers to products that a company had purchased or produced which cannot be sold. The obsolete items may be the result of one or more of the...
What is the difference between inventory and the cost of goods sold? Definition of Inventory Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. A...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
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...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
What is a special journal? Definition of a Special Journal A special journal (also known as a specialized journal) is useful in a manual accounting or bookkeeping system to reduce the tedious task of recording both the...
the $560 of wages payable that Jane had earned and the company owes as of December 31. (The company’s income statement for the year that ends on December 31 must also report the $560 as part of its wages expense.) The...
and asked that his billing period be changed to cover the calendar month. They were pleased to make the change. Next, the owner called his bank and asked if the bank would be able to deduct the current month’s loan...
account for a certain transaction. Example of a Credit Memo Assume that SellerCorp had issued a sales invoice for $800 for 100 units of product that it shipped to BuyerCo at a price of $8 each. BuyerCo informs...
to the condo project. Hence the drop ship allows XYZ to avoid some expensive non-value-added activities. When Premier ships the water heaters, it will bill XYZ and will send the invoice to XYZ. As a result XYZ will have...
liability is reduced. Think of those future repair/replacement costs as a selling or promotion expense to get the sale to occur. Periodically, the credit balance in the Warranty Liability account is reviewed to be...
What is an outstanding check? Definition of Outstanding Check An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
the $800 in its bank account until the morning of November 1. Since the $800 is not on the company’s bank statement as of October 31, the $800 is an outstanding deposit or deposit in transit as of October 31. On the...
for $500 Credit to Sales Taxes Payable for $30 Note that Sales Revenues did not include the $30 of sales taxes collected. When the retailer remits the sales taxes to the government, the retailer will reduces its...
How should a mortgage loan payable be reported on a classified balance sheet? Definition of a Mortgage Loan Payable The account Mortgage Loan Payable contains the principal amount owed on a mortgage loan. (Any interest...
record the $9 cash discount with a debit to the account Sales Discounts. The buyer will record the $9 savings as a credit to Purchase Discounts or as a reduction to the cost recorded in inventory. My dentist offers a 5%...
was $300,000 and the average inventory was $150,000 the inventory on average turned to cash only 2 times during the year. When inventory items are slow to be converted into cash, the company’s money is sitting in...
account and the only authorized check signer is the owner. The owner is going to take a short vacation and will have the office manager be in charge. In case a payment must be made when the owner is on vacation, the...
adjusting entry that debits Vacation Expense for $200 (10 hours X $20 per hour) and credits Vacation Liability for $200. As a result, the balance in the balance sheet account Vacation Liability at December 31 is $2,400...
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...
. This will get the proper amounts on the company’s income statement and balance sheet. The account Interest Expense will begin January with a zero balance, since expenses are temporary accounts that are closed at the...
, the merchant will debit Cash for $105 and will credit Sales for $100 and will credit Sales Tax Payable for $5. Sales Tax Payable is a liability account. When the sales taxes are remitted to the state, the merchant will...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
was $3,600,000 and the average cost of its inventory account during the year was $400,000. As a result, the company’s inventory turnover ratio is: cost of goods sold of $3,600,000 divided by average inventory of...
) is the difference between the number of shares issued and the number of shares outstanding. Since the treasury shares result in fewer shares outstanding, there may be a slight increase in the corporation’s earnings...
could clear (be paid from) the bank account prior to that date. Post-dating a check makes sense only if you are certain that the payee will not cash or deposit the check before the date appearing on the check. Example...
or discount is to be amortized to interest expense over the life of the bonds. Hence, the balance in the premium or discount account is the unamortized balance. Where the Premium or Discount on Bonds Payable is...
ledger accounts. At any point you can go to an account such as Salaries Expense for Sales Staff and see the year to date amount of such an expense. With the use of accounting software, an enormous quantity of...
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
Evaluating Business Investments Evaluating Business Investments When someone is deciding to invest in business assets that have a life of more than one year, it is important that the time value of money be considered....
Financial Statements Video Training Part 1 Introduction to the main financial statements and accounting rules, balance sheet heading and sections, reporting of cash Must-Watch Video Learn How to Advance Your Accounting...
Financial Statements Video Training Part 6 Balance sheet: current liabilities (notes payable, accounts payable, accrued expenses, customer deposits) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
Our income statement shows wide fluctuations in utilities expense from month to month. I suspect our accounting is not proper. Any suggestions? Under accrual accounting, your income statement should report the amount for...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
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