amounts are irrelevant for today’s decisions they may help the management accountant to understand how costs behave, which costs to examine, etc. Some past costs could also have an impact on income tax payments or...
amounts are irrelevant for today’s decisions they may help the management accountant to understand how costs behave, which costs to examine, etc. Some past costs could also have an impact on income tax payments or...
receivable is $92,000. Adjustments to the Allowance account are reported on the income statement as bad debts expense. Now, let’s assume that a company’s inventory has a cost of $15,000. However, at the end of the...
proprietor working in her own business. For example, Jane works as a sole proprietor and her business reported a net income of $30,000 for the year. Since a sole proprietor does not receive a salary or wages, there is...
investment’s interest that is earned in December but the money will not be received until a later accounting period. This interest should be recorded as of December 31 with an accrual adjusting entry that debits...
of $15,000) is reported on the income statement as a separate item. Often this loss appears in the income statement section entitled Other or Nonoperating. The $10,000 of proceeds from the sale of the plant asset is...
be recorded in the company’s Purchases account. Select... True False 18. A separate account for meals expense is helpful since business meals are expensed in full on the financial statements but may or may not be...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
amount of debt in relationship to owner’s equity. 16. In financial ratios, debt refers to the total amount of __________. 17. In the vertical analysis of a retailer, each amount on its income statement will be divided...
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...
of goods sold on the income statement. Inventory is important for a company’s profitability and survival. For instance, if a retailer or manufacturer does not have sufficient inventory of requested items, the result...
income tax returns. The reason is that the financial statement depreciation is based on the matching principle of accounting while the income tax depreciation is based on income tax regulations and tax strategies....
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
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...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services,...
for one of its customers. Periodicity allows the manufacturer to divide the manufacturing costs of the machine into the 24 monthly periods covered by the contract. Periodicity also allows the manufacturer to report the...
of an asset’s cost that has been moved to the income statement in the form of depreciation expense since the asset was acquired. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
. For example, if the current income statement shows the cost of goods sold as 86% instead of the normal 81%, the current month’s amounts should be investigated before releasing the financial statements. Join PRO to...
but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense Credit Wages Payable or credit Accrued Wages Payable Wages...
income is its operating revenues minus the cost of goods sold and its sales, general and administrative expenses. The FASB’s Statement of Financial Accounting Concepts No. 6, Elements of Financial Statements,...
on the income statement over the asset’s useful life. Accountants point out that depreciation is an allocation process which does not result in reporting the asset’s market value. Example of Recording Depreciation...
. The combination of all the budgets is referred to as the company’s master budget or profit plan. Budgets help management decide which activities it will undertake and how the company’s resources will be used. If...
as follows: Credit to its Land account for its cost of $200,000 Debit to its Cash account for the $500,000 it received Credit to the income statement account Gain on Sale of Real Estate for $300,000 Join PRO to Track...
that were provided. This is done with a debit to the liability account Gift Certificates Outstanding and a credit to a revenue account. Our explanation pertains to financial accounting. To learn about the income tax...
in the business minus the owner’s draws or withdrawals from the business plus the net income (or minus the net loss) since the business began. Owner’s equity is viewed as a residual claim on the business assets...
expense for 10 years. (U.S. income tax rules allow accelerating the yearly depreciation amounts, but the total amount of depreciation cannot exceed the asset’s cost.) Join PRO to Track Progress Mark the Question as...
of the statement of cash flows. (If an asset other than cash is withdrawn, it is reported as supplemental information on the statement of cash flows.) The income statement is not affected by the owner’s drawings since...
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
What are turnover ratios? Definition of Turnover Ratios In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by an average asset amount for the same year....
, and net income are uncertain. This risk has resulted in the decline of defined benefit pension plans and has increased the popularity of defined contribution pension plans. Join PRO to Track Progress Mark the Question...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
refer to the allowance account as Allowance for Uncollectible Expense, Allowance for Bad Debts or Provision for Bad Debts. The related income statement account could have the title of Uncollectible Accounts Expense,...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
of wages for which they will be paid on the first Friday in January. In order to comply with the matching principle, the account Wages and Salaries Expense must include the $3,000 of wages in order to match the December...
to be certain that: The current month’s insurance expense of $1,000 ($6,000/6 months) is reported on each month’s income statement. The unexpired amount of the prepaid insurance is reported on the balance sheet...
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