Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
in net income. Since the internet business was not purchased from another company and its cost to develop was not significant, the company’s balance sheet will report only the business’s cash, receivables and some...
, __________ 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....
of the amount must be reported as 1) revenue in a future period, or 2) expense in a future period. The deferral adjusting entry makes certain that the correct amounts will be reported on a company’s balance sheets and...
) but the actual quantity exceeded the standard quantity due to inefficiencies, the materials usage variance will have to be reported on the income statement as an addition to the standard amount of the Cost of Goods...
. For instance, if the payment was made on December 1 for protection during the upcoming period of December 1 through May 31, the retailer’s December’s income statement should report Insurance Expense of $200 (the...
. Knowing how costs behave when sales or other activities change will allow you to better understand how a company’s gross profit and net income will change. It also allows you to quickly calculate a product’s...
selling price in the ordinary course of business minus any costs of completion, disposal, and transportation. When the cost of the inventory is reduced to the NRV, the amount of the write down is reported as a loss on...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
. Definition of Closing Entries Closing entries are dated as of the last day of the accounting period, but are entered into the accounts after the financial statements are prepared. Closing entries involve the temporary...
What is the cost of goods sold? Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income...
statements. If a company has small inventory amounts and significant sales, a simple cost system that spreads manufacturing overhead costs solely on the basis of machine hours can result in a reasonably accurate balance...
What is inventory change and how is it measured? Definition of Inventory Change Inventory change is the difference between the amount of last period’s ending inventory and the amount of the current period’s ending...
on December 31 was already in bankruptcy condition, the corporation must adjust its December 31 balance sheet by reducing its net receivables by $200,000 and reporting bad debts expense of $200,000 on its income...
, the payment will be a debit of $27,720 to Accounts Payable, a debit of $280 to Purchase Discounts, a credit to Cash for $28,000. Purchase Discounts Lost is an income statement account.] Join PRO to Track Progress Mark...
into meaningful reports the various digits do signify a specific category. False Wrong. 3. The accounts shown in the chart of accounts can be broadly classified into two categories: balance sheet accounts and __________...
statements. One of the basic underlying principles in GAAP is the cost principle. This means that the inventories, the cost of goods sold, and the resulting net income must reflect the manufacturer’s actual historical...
per unit appearing as the cost of goods sold on the recent income statement. Had the replacement cost of the product been used, the cost of goods sold might have been $145. Assuming the product was sold for $165, the...
of a company’s fixed expenses assists in understanding how the retailer’s net income will change as volume changes. The total amount of fixed expenses can also be used to quickly estimate a company’s break-even...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
What is par value? Definition of Par Value Par value is a per share amount that will appear on some stock certificates and in the corporation’s articles of incorporation. (Some states may require a corporation to have...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
What is premium on common stock? Definition of Premium on Common Stock If a corporation’s common stock has a par value and the corporation receives more than the par value when issuing a new share of the stock, the...
What is the difference between wages and salary? You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction… Definition of Wages Wages are...
What does current portion of long term debt mean? Definition of Current Portion of Long-Term Debt The current portion of long-term debt is the amount of principal that will be due within one year of the date of the...
How do I record a loan payment which includes paying both interest and principal? Definition of a Loan Payment A loan payment is likely to consist of three amounts: Total payment amount Interest payment Principal payment...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
What is the meaning of aging? Definition of Aging In accounting, the term aging is often associated with a company’s accounts receivable. Accounts receivable arise when a company provides goods or services and allows...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
What is the difference between a trial balance and a balance sheet? Definition of Trial Balance A trial balance is an internal report that remains in the accounting department. The trial balance lists all of the accounts...
Can a fully depreciated asset be revalued? A fully depreciated asset cannot be revalued because of accounting’s cost principle. Definition of a Fully Depreciated Asset A fully depreciated asset is one that has...
What is EBITDA? EBITDA is the acronym for earnings before interest, taxes, depreciation and amortization. Take our Financial Ratios Exam. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
What is book value? Definition of Book Value In accounting, book value refers to the amounts contained in the company’s general ledger accounts (or books). It is important to realize that the book value is not the same...
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...
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
What is the abbreviation for debit and credit? Abbreviation for Debit and Credit The abbreviation for debit is dr. and the abbreviation for credit is cr. Apparently the “dr.” is associated with the term used in Italy...
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