What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
Where is a manufacturer's inventory reported in the balance sheet? A manufacturer’s inventory will be reported in the current assets section of the balance sheet and in the notes to the financial statements. In the...
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...
A company’s sales in a market as compared to the total sales in that market. For example, General Motors share of the U.S. market has decreased from more than 50% in the 1960’s to its present market share of...
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
The accounts outside of the general ledger which provide the detail for the balance reported in a general ledger account. (The account in the general ledger is known as the control account.) For example, each credit...
A multicolumn listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of...
A phrase used to communicate the total compensation of a salaried employee. Fringe benefits (health insurance, vacation days, sick days, employer matching of Social Security and Medicare taxes, pension or 401-k...
An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner’s or stockholders’ equity....
and administrative expenses Nonoperating expenses (or other expenses) which were incurred but were outside of the corporation’s main activities. An example is the interest expense incurred by a retailer. Gains An...
. OUTSTANDING GDNSUITATON Unscramble OUTSTANDING UNTONISTGAD Unscramble 11. Stockholders' equity is the total ________ value of a corporation. BOOK OBOK Unscramble BOOK OKOB Unscramble 12. Stockholders' equity...
statement information will be incorrect: The balance sheet at the end of the current accounting period will report too little inventory. This in turn means the amount of current assets, the amount of total assets, the...
that the net amount will also be reported. The net amount is often referred to as the carrying amount or perhaps the net realizable amount. Examples of Contra Accounts To illustrate, let’s use the contra asset account...
amount if it is paid within 10 days instead of the required 30 days) the amount of the discount is recorded in the contra revenue account Sales Discounts. Again, the company’s management will see the original amount...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
proprietorship). Example of Income Summary Account In a manual accounting system, the closing entries will result in the following amounts in Income Summary: A credit amount for the total amount of the general ledger...
of vacation for each month worked. However, the vacation hours for the year accumulate. The total vacation hours earned as of December 31 will be paid to the employee on June 1 of the following year by using the...
the cumulative average time will be 80 hours (80% of 100 hours). This cumulative average of 80 hours consists of 100 hours for the first website plus only 60 hours for the second website resulting in a total of 160...
Why does the fixed cost per unit change? Definition of Fixed Cost per Unit Fixed costs such as rent, salaries, depreciation, etc. generally do not change in total within a reasonable range of volume or activity. On the...
) the finishing department’s $400,000 budget could be divided by the total expected number of machine hours. Assume that total number of expected machine hours is 40,000 to finish the 50,000 units of product....
. For this example, the relevant range is between 300,000 units and 500,000 units of output per year. In that range the total of the two fixed costs is $1,400,000 per year. Below 300,000 units, the fixed costs will drop...
to maturity) of 6% as shown here: The present value of the cash from a 5% $100,000 bond maturing in 3 years and trading in a 6% market is as follows: $2,500 every six months for 3 years discounted by 3% semiannually =...
rate The three product costs are used for calculating the cost of goods sold and the cost of the various inventories. If there is a difference between the total amount of overhead costs applied to the products and the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed...
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
income statement, the company's May 31 balance sheet will report the account receivable as an asset. The balance sheet will be in balance because revenues also cause an increase in retained earnings. 3. Under the...
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...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
that it no longer uses in its business. The amount received by the company is more than the amount the asset is carried at in the accounting records. The company will report a(n) __________. Expense Wrong. Expenses are...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
What is notes receivable? Definition of Notes Receivable Notes receivable is an asset of a company, bank or other organization that holds a written promissory note from another party. (The other party will have a note...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
What is the tax advantage when bonds are issued instead of stock? Definition of Bonds and Stock In this context, bonds refers to bonds payable, a form of long-term debt that typically promises to pay interest every six...
of Gains Other examples of gains that could appear on a company’s income statement include: Gain on sale of investments Gain on sale of building Gain on legal settlement Gain on early extinguishment of debt Join PRO...
of accounting principles and concepts. Perhaps a company increases its allowance for doubtful accounts with an increased bad debts expense only in the years with high profits. Then in a year with low profits, the...
debt is an expense of the corporation and it reduces the corporation’s net income. For profitable corporations, interest expense also reduces its taxable income and the corresponding income tax expense. The income tax...
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