Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
be reported as revenues on the income statement.) The liability account communicates that a company has an obligation to provide its customers with goods or services or return the money to the customers. Equity Wrong....
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 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...
Balance Sheet Balance Sheet The balance sheet is also known as the statement of financial position and it is one of the five external financial statements issued by U.S. corporations. The balance sheet reflects 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.
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...
capital account) increases. Accountants do prepare an income statement or P&L to report the revenues and expenses, but the ultimate effect of a positive amount of profit or net income is to increase the business’s...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
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...
to as an outstanding check. In the bank reconciliation process an uncleared cheque (or outstanding check) is deducted from the balance shown on the bank statement to arrive at the correct or adjusted balance per bank....
What is meant by reconciling an account? Definition of Reconciling an Account Reconciling an account is likely to mean proving or documenting that an account balance is correct. Examples of Reconciling an Account When a...
financial accounting and reporting cost/managerial accounting accounting systems auditing, attestation and assurance income tax for individuals income tax for corporations financial statement analysis accounting...
statement will present an accurate picture of December’s profits and the balance sheet will report the liability for the wages owed as of December 31. Join PRO to Track Progress Mark the Question as Read Must-Watch...
are responsible for the income taxes which pertain to their share of the S corporation’s income. Hence, the income statement of an S corporation does not report income tax expense, and the balance sheet does not...
on a multiple-step income statement prior to deducting selling, general and administrative expenses and prior to nonoperating revenues, nonoperating expenses, gains and losses. Example of Gross Profit Let’s assume...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
. During December the retailer will have incurred the cost of the electricity it used during December. Under the accrual basis of accounting the retailer must report a current liability on December 31 for the amount owed...
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...
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...
, is now on the bank statement, but it is not in the cash account. Therefore, you need to put the check amount into the general ledger. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
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....
on their statement of activities according to the following functions: Each of its major programs Management and general Fund-raising Membership development In addition, not-for-profit organizations report their...
with the principal balance in the lender’s records. This can be confirmed on a loan statement from the lender or by asking the lender for the principal balance. Join PRO to Track Progress Mark the Question as Read...
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,...
corporation can be computed using the before tax earnings and/or the after tax earnings. Example of Return on Assets Ratio Assume that during its most recent year, a company’s income statement reported net income...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
on the income statement as Bad Debts Expense or Uncollectible Accounts Expense. Examples of Recording Bad Debts There are two methods for recording the bad debts associated with accounts receivable: Direct write-off...
, plant and equipment for a cash amount that is less than the carrying amount (or book value) of the asset sold. Nonoperating expenses and losses are often reported on the income statement after the subtotal Income from...
issued its Statement No. 151, which discusses the reporting of the fixed production overhead when less than normal capacity is utilized. The FASB’s Statements of Financial Accounting Standards are available at no cost...
of the accounting department and are often distributed outside of the company. The balance sheet summarizes and reports the balances from the asset, liability, and stockholders’ equity accounts that are contained in...
. General guidance for determining when revenues are earned can be found in paragraphs 83 and 84 of the FASB’s Statement of Financial Accounting Concepts No. 5, Recognition and Measurement in Financial Statements of...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
. 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...
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