will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
is not relevant. The revenue recognition principle prohibits a company from showing a gain from merely holding a plant asset. What would you credit if you increased the plant asset amount? Those four accounting...
of expenditures that will not be an expense in the accounting period in which the payments are made include the purchase of land for a future expansion and the principal portion of a monthly loan payment. Here is an...
the electricity. Each department’s electricity is then allocated/assigned to the products processed in the department. The cost of raw land that was purchased for $1 million is going to be developed into 80...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
is not adjusted for inflation or for changes in the current value or replacement value of the asset. For buildings, equipment, fixtures, vehicles, and other long-lived tangible assets other than land, the asset’s...
What is a lease? Definition of a Lease Typically, a lease is a written agreement between an owner of property (land, building, equipment, vehicle, etc.) and a person or business that will use the property for a stated...
and equipment. This classification includes land, buildings, machinery, equipment, vehicles, fixtures, etc. that are used in the business. These assets are reported at cost and the contra asset accumulated depreciation...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
rate, the asset will also be recorded at $50,000. A long-term asset that will be used in a business (other than land) will be depreciated based on its cost. The cost will be reported on the balance sheet along with the...
What is the difference between a cost and an expense? Definitions of Cost and Expense Some people use cost interchangeably with expense. However, we use the term cost to mean the amount spent to purchase an item, a...
, the amount of interest paid, and significant noncash investing and financing activities (such as issuing common stock in exchange for land) The statement of cash flows is important because investors, lenders, financial...
investments, land, buildings, machines, equipment, furniture, fixtures, vehicles, goodwill, and more. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
depreciation expense, assume that a company had paid $480,000 for its office building (excluding land) and the building has an estimated useful life of 40 years (480 months) with no salvage value. Using the...
Is the sales tax on merchandise purchased for resale included in inventory? In our state, sales tax is paid only by the end customer. In other words, a retailer does not pay sales tax on merchandise that is purchased for...
How do you calculate the break-even point in terms of sales? Definition of Break-even Point in Sales Dollars The break-even point in sales dollars can be calculated by dividing a company’s total fixed expenses by the...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
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...
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...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
This is the left side of an account and also the normal balance for asset, expense, and loss accounts. Mark as wrong Mark as right credit (or) credit balance This is the right side of an account and also the normal...
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...
. The company’s gain or loss if it retires all of its bonds is a __________ (gain, loss) of $__________. Select... gain loss Use the following information for answering Questions 37 - 40: On January 1, 2024 a company...
of the accounting period the inventory account is adjusted to the amount on hand. Perpetual Wrong. Under the perpetual method the Inventory account IS continuously or perpetually updated with each purchase or sale of...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
. There will be no depreciation expense recorded after the asset is fully depreciated. No entry is required until the asset is disposed of through retirement, sale, salvage, etc. To illustrate this, let’s assume that a...
, the value of the collateral has dropped to less than $120,000 ($170,000 minus the 30% average drop in value), and a lot of houses are for sale with virtually no buyers. Join PRO to Track Progress Mark the Question as...
of the chart of accounts: Asset section if the cash was from the sale of another asset or the collection of an asset Liability section if the cash was a deposit for future work to be done Revenue section if the cash was...
stops using one of its buildings and puts the building up for sale. In that situation, the journal entry description might be, “To reclassify the X building from property, plant and equipment to long-term...
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
of carriage outwards should be reported on the income statement as an operating expense in the same period as the revenue from the sale of the goods. (Carriage outwards is not part of the cost of goods sold.) Example of...
At what point are revenues considered to be earned? Revenues, which are derived from an entity’s main activities such as the sale of merchandise or the performance of service, are considered to be earned when the...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
+ Revenues – Expenses – Dividends – Treasury Stock. The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2)...
in the heading of SCF. Examples of Financing Activities Sources of cash provided by financing activities include: Borrowing money on a short-term basis and/or long-term notes basis from a bank or other lenders...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
Featured Review
"My current position is as a CPA. I have utilized many tools from AccountingCoach PRO, both in assisting other professionals to learn and more importantly in my role as an adjunct professor. The materials provided by AccountingCoach are organized by topic and the modules are built on each other, making it a perfect learning—or in my case, teaching—tool. AccountingCoach has saved me hundreds of hours in developing teaching materials, as I use the materials provided to supplement the college textbooks. " - Robert C.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: