The net amount of revenues and gains minus expenses and losses for the sole proprietorship owned by Matt Jones. After the financial statements are prepared for the year, this amount will be transferred to Matt Jones,...
The net amount of revenues and gains minus expenses and losses for the sole proprietorship owned by Matt Jones. After the financial statements are prepared for the year, this amount will be transferred to Matt Jones,...
A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
The contra owner’s equity account used to record the current year’s withdrawals of business assets by the sole proprietor for personal use. This is a temporary account with a debit balance. It will be closed...
Accounts that have some restrictions. For example, an investment account and a cash account might be restricted for the construction of a new factory. The restrictions mean that these accounts be reported as a long-term...
The contra owner’s equity account that reports the amount of withdrawals of business cash or other assets by the owner for personal use during the current accounting year. At the end of the accounting year, the...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
A detailed plan with dollar amounts. Examples of budgets used in business include the cash budget, sales budget, production budget, department budgets, the master budget, and the capital expenditures budget. Some budgets...
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
are closed at the end of the accounting year, the net amount will ultimately end up in a balance sheet equity account such as the proprietor’s capital account or the corporation’s retained earnings account....
rolling budget for capital expenditures. In this case a full year will be added to replace the year that has just ended. This 5-year rolling budget means that management will always have a forward looking 5-year capital...
it indicates that the company has paid more than the amount owed, has made an incorrect entry, etc.) Equity accounts including the stockholders’ equity accounts Common Stock, Paid-in Capital in Excess of Par Value,...
Capital expenditures (which is a separate item reported under cash flows from investing activities) Example of Free Cash Flow Assume that during the most recent year a corporation had cash flows from operating...
statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
in the retained earnings, which is part of stockholders’ equity. A net loss will cause a decrease in retained earnings and stockholders’ equity. A sole proprietorship’s net income will cause an increase in the...
approach is also referred to as the capital maintenance approach. Under the balance sheet approach one looks at the change in stockholders’ or owner’s equity to determine the amount of net income during the period...
Retained Earnings and to increase the corporation’s Paid-in Capital. Therefore, the total amount of stockholders’ equity and the total amount of assets are unchanged. Occasionally, a corporation will distribute...
will be refinanced by issuing new bonds, another long-term liability, or by issuing shares of stock. It appears the focus is on the company’s working capital (current assets minus current liabilities). If the company...
will include vehicle loans, bonds payable, capital lease obligations, pension and other post-retirement benefit obligations, and deferred income taxes. Some long-term debt that will be due within one year can continue...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
How do you record an owner's money that is used to start a company? Recording Money to Start a Sole Proprietorship If Amy Ott begins a sole proprietorship by putting money into her business, the sole proprietorship...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
How much of the contribution margin is profit on units sold in excess of the break-even point? After the break-even point is reached, the entire contribution margin on the next units sold will be profit…provided the...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
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...
Capital Working capital is actually an amount (rather than a ratio) which is an indicator of a company’s ability to meet its obligations. It is calculated as follows: current assets minus current liabilities. For...
obligations and include deferred revenues. Mark as wrong Mark as right owner's equity This is the difference between the amount of a proprietorship’s assets and liabilities. It consists of the owner’s capital...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
inventory such as the cost of capital, space, insurance, etc. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
by reading our Debits and Credits (Explanation) and Additional Explanation. Use the following information for questions 1 and 2: A company receives $500 of cash as an additional investment in the company by its owner,...
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