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...
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 common-size financial statements? Common-size financial statements present the financial statement amounts as a percentage of a base number. For example, the common-size income statement will report the revenue...
How do you reduce the break-even point? Definition of Break-even Point The break-even point is the number of units or amount of revenues needed for the company’s income statement to report zero net income or zero net...
of common stock outstanding. This $600,000 distribution of cash will reduce the balances in two of the corporation’s balance sheet accounts: The current asset account Cash is reduced by $600,000 The stockholders’...
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...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
the balance sheet and the income statement. For instance, the balances in the income statement accounts will be the net income or net loss that will be transferred to the owner’s capital account at the end of the...
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...
(a balance sheet account) for $500, and credits Interest Income (an income statement account) for $500. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
a company’s financial statements. adjusting entry This type of journal entry is used to accrue or defer amounts prior to preparing a company’s financial statements. Mark as wrong Mark as right closing entries These...
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,...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
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...
cost or fixed expense. Fixed expenses such as depreciation expense and property insurance expense are reported on a company’s income statement. Understanding which costs are fixed and which are variable is important...
. 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...
and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
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...
.), the amount received is not recorded as a sale. (Instead, the company will report this transaction on its income statement as a gain or loss on the disposal of an asset.) Example of Sales The amounts recorded at the...
not have been avoided, then the sales tax would be part of the cost of the merchandise purchased. If the merchandise has not been sold, the entire cost will be reported as inventory, a current asset on the balance...
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....
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
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...
that during a recent year a company’s income statement reported net sales of $2,100,000. During the same period, the company’s total assets reported on its 12 monthly balance sheets averaged $1,400,000. The...
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...
. 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...
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,...
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...
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...
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...
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...
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...
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...
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...
. 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...
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...
to the credits. Mark as wrong Mark as right adjusting entry This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a...
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 Balance Sheet (Explanation). 1. Another name for the balance sheet is Statement Of Operations Wrong. The statement of operations is another name for the income statement. Statement Of Financial Position Right! The...
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...
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