. This is needed because the accrual basis of accounting requires the income statement to show the revenues that were earned (not the money actually received) and the expenses incurred or matched to the accounting period...
. This is needed because the accrual basis of accounting requires the income statement to show the revenues that were earned (not the money actually received) and the expenses incurred or matched to the accounting period...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the...
a temporary account that will cause the owner’s equity to decrease. Generally speaking, the credit balance reported in the owner’s or stockholders’ equity section of the balance sheet reflects the owners’...
has not earned any of the contract amount and therefore does not have a right or a receivable to the $20,000 as of December 31. Similarly, Company Jay’s income statement for December and its December 31 owner’s...
and it is often used to compute the net present value of the cash flows in a proposed investment. It is also considered to be the minimum after-tax internal rate of return to be earned on new investments. For a...
will have the same accounts but different amounts due to the number of employees and/or the number of hours worked. Other examples of recurring entries with amounts that differ each period include sales, interest...
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...
will cause the related expense known as the cost of goods sold to be reported/recognized on the July income statement. If the company’s sales reps have earned commissions on the July sales, these commissions...
which are the amounts owed to vendors who have supplied goods or services. The amount of accounts payable is documented by the vendor invoices that have been approved and processed, but have not yet been paid. Deferred...
How can a company have a profit but not have cash? Definition of Profit Under the accrual basis of accounting, profit is the amount of revenues earned minus the amount of expenses incurred. Note that revenues are not...
cash inflows and cash outflows during the same period as the company’s income statement. The cash flow statement is important because the income statement reflects the accrual method of accounting. This means the...
What is the effective interest rate? Definition of Effective Interest Rate The effective interest rate is the true rate of interest earned. It can also mean the market interest rate, the yield to maturity, the discount...
on its investments. The investment interest and dividend amounts earned will be reported on the income statement as other income. To provide more clarity, accountants use the term net income to describe the amount...
that a company’s: Income statement reports the revenues that have been earned during the accounting period Balance sheet reports the receivables that it has a right to receive as of the end of the accounting period...
What is yield to maturity? Definition of Yield to Maturity Yield to maturity is the total return that will be earned by someone who purchases a bond and holds it until its maturity date. The yield to maturity might also...
What is accrued payroll? Definition of Accrued Payroll Accrued payroll includes wages, salaries, commissions, bonuses, and other payroll related expenses that have been earned by a company’s employees, but have not yet...
off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper. (Examples include interest on bank loans since the last loan payment, wages earned by...
with revenues (instead of recognizing or reporting an expense when it is paid). The accrual method also results in the reporting of revenues in the accounting period in which they were earned (instead of reporting them...
a company’s fixed expenses for a period of time by the contribution margin ratio. Mark as wrong Mark as right sales This term is associated with the revenues earned by selling products. It can be expressed as units...
they are earned through the delivery of goods or services. revenues Under the accrual method, these accounts are credited when they are earned through the delivery of goods or services. Mark as wrong Mark as right gain...
’ equity account Retained Earnings will increase. (However, the amount earned will first be recorded in the temporary account Revenues Earned in order for the amount to easily be reported on the income statement.)...
’ __________. 10. Purchasing supplies on credit will be recorded with a credit to the account __________ __________. 11. Sales of merchandise and fees earned from providing services are examples of the income statement...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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.
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
.) If a corporation had cash from operating activities of $200,000 and necessary capital expenditures of $60,000 the amount of free cash flow was $140,000. Times Interest Earned Times interest earned indicates a...
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...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
. 40. The times interest earned ratio relates interest __________ to a total income amount. Select... earned expense 41. The times interest earned ratio is calculated using income before __________. Select... income...
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.
of accounting, net income is based on the following: revenues earned during the accounting period (not in the period when the money is received) minus the expenses incurred in the accounting period (not in the period...
. PERIOD PRDEOI Unscramble PERIOD EOIRPD Unscramble 6. The amounts earned from a company's main activities. REVENUES VNEERSEU Unscramble REVENUES UNEVRESE Unscramble 7. The costs that are matched with revenues....
. The specified rate could be the investor’s cost of capital or it could be another hurdle rate that must be earned. Advantages of using the net present value to evaluate investments include the following: All of an...
with a debit to Cash for $12,000 and a credit to the current liability account Deferred (or Unearned) Revenues for $12,000. On January 31, the maintenance service company should report that during the month of January...
for the period is 6,000 units and the actual direct labor hours were 18,400 hours and the labor earned $10.30 per hour. The standard direct labor cost for the actual output should have been 18,000 hours (6,000 units of...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
for working on the job will be 1,880 hours per year (2,080 hours minus 200 hours) multiplied by $20 per hour = $37,600 for a year. Next let’s assume the following are the annual costs for the fringe benefits earned by...
, adjustments to the sales invoice amounts, etc. Does Sales Include Sales Tax? The amount of a company’s sales does not include the sales taxes collected by the seller. The reason is that the sales taxes included in...
, __________ liability, and stockholders' equity accounts are known as balance sheet accounts. 13. Large corporations should report revenues on their income statements when the __________. Cash Is Received Wrong....
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