between the asset amounts reported on the balance sheet minus the liability amounts. Next, the accountant’s cost principle requires that only the cost of items purchased can be reported as an asset. This means that...
between the asset amounts reported on the balance sheet minus the liability amounts. Next, the accountant’s cost principle requires that only the cost of items purchased can be reported as an asset. This means that...
= Liabilities + Owner’s Equity, to understand why an asset (shown on the left side of the accounting equation) will normally have its account balance on the left side or debit side. Liabilities and owner’s equity...
asset. The deferred expenses that will not become expenses within one year of the date of the balance sheet will be reported in the long-term asset section of the balance sheet under the classification of other assets....
report a corporation’s assets as dollar amounts (rather than reporting details of all of the assets). If an asset cannot be expressed as a dollar amount, it cannot be entered in a general ledger account. For example,...
. Therefore, to reduce the credit balance, the expense accounts will require debit entries. Example of Rent Expense as a Debit If a company pays $800 for the current month’s rent, the company’s assets and its...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
What does stepped cost mean? Stepped cost refers to the behavior of the total cost of an activity at various levels of the activity. When a stepped cost is plotted on a graph (with the total cost represented by the...
What are semivariable costs? Definition of Semivariable Costs Semivariable costs are costs or expenses whose behavior is partially fixed and partially variable. That is, part of the total cost does not increase or...
…for a total market value of $250,000. In other words, the appraisal indicates that the land is 20% ($50,000/$250,000) of the market value, and the building is 80% ($200,000/$250,000) of the market value. The...
an annuity include: The equal amounts of interest paid every six months by the issuer of debt securities known as bonds. The monthly payments required by a lease agreement for equipment or a vehicle. The annual payments...
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
. income tax return. Definition of Bonds Bonds are a form of long-term debt in which the issuing corporation promises to pay the principal amount at a specified maturity date. Bonds also promise to pay a fixed interest...
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 debt and the cost of equity). However, the hurdle rate is usually larger than the cost of capital when the company has many investment opportunities and for projects that have a higher level of risk. Join PRO to...
for Listing Current Liabilities Within the current liabilities classification, the order in which the current liability accounts are listed can vary. Here is a summary of how they might be organized: Short-term notes...
, and interest. Example of an Accrual as a Current Asset Assume that during December a company has earned interest of $5,000 on its investment in U.S. Treasury bills. However, all of the interest will be received by the...
) the total dollars of the mixed cost that occurred at the highest volume of activity, and 2) the total dollars of the mixed cost that occurred at the lowest volume of activity. It is assumed that at both points of...
How do you determine the fixed portion of overhead cost? I suggest that the first step in determining the fixed portion of a mixed cost (a cost that is partially fixed and partially variable) is to graph the data. Label...
A listing of the general ledger accounts and their account balances at a point in time after the adjusting entries have been posted. The grand total of the accounts with debit balances should equal the grand total of the...
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
An internal accounting report that is prepared prior to recording the adjusting entries. Its purpose is to verify that the total amount of debit balances in the general ledger accounts is equal to the total amount of...
A symbol that indicates the total amount of fixed costs during a specified period of time. In the equation of the straight line, y = a + bx, the total amount of fixed costs during the period is represented by...
many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold. The total capex amount that was spent in a recent accounting period is reported in the statement...
will be too high A regular corporation’s income tax expense will be too high The overstating of inventory will also affect the following reported amounts on the corporation’s balance sheet: The amount of inventory...
not reflect the value of a business is a startup company with a promising future. We may have read that a venture capitalist (VC) invested $10 million in a startup. Based on that investment the startup is assumed to...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
to determine the approximate amount of inventory that has been lost due to theft, fire, or other reasons. The gross profit method of estimating ending inventory assumes that the gross profit percentage or the gross...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Unscramble 3. Land is an asset that is not ____________________. DEPRECIATED EIEAPECRDTD Unscramble DEPRECIATED EIEEACRDTPD Unscramble 4. An asset's book value is its cost minus its __________________ depreciation....
is deferred to the balance sheet account Prepaid Rent (or Prepaid Expenses,) which is a current asset. During the three months of January 1 through March 31 (when the prepaid rent is expiring) the $3,000 prepayment must...
Stockholders' Equity (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (39) Marked Wrong (0) Marked Right (0) stockholders' equity (or) shareholders' equity The total of this...
or the left side of a T-account. Example of Dr. Typically, the general ledger accounts for assets and expenses will have debit (dr.) balances and the balances in the asset accounts will be increased with debit amounts....
A general ledger account containing the correct total amount without containing the details. For example, Accounts Receivable could be a control account in the general ledger. Each day the total of the day’s credit...
Also known as time-and-one-half. A term used in conjunction with overtime pay when an employee gets a 50% higher pay rate for hours in excess of 40 hours per week. The “half” is also known as the overtime...
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