methods: Indirect method (almost always used) Direct method (rarely used) The indirect method begins with the company’s net income based on the accrual method. That amount is then converted to the cash from operating...
methods: Indirect method (almost always used) Direct method (rarely used) The indirect method begins with the company’s net income based on the accrual method. That amount is then converted to the cash from operating...
What are balance sheet accounts? Definition of Balance Sheet Accounts Balance sheet accounts are one of two types of general ledger accounts. (The other accounts in the general ledger are the income statement accounts.)...
at least one income statement account and at least one balance sheet account. Examples of Adjusting Entries The following are some examples of the need for adjusting entries: To report expenses and losses along with the...
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 the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
the following costs: direct materials direct labor variable manufacturing overhead fixed manufacturing overhead Absorption costing is required for external financial reporting and for income tax reporting. Another...
. income tax return. Definition of Bonds Bonds are a form of long-term debt in which the issuing corporation promises to pay the principal amount at a specified maturity date. Bonds also promise to pay a fixed interest...
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...
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...
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
accumulated depreciation. It is also the face value of bonds minus its unamortized discount (or plus its unamortized premium). It is also the amount of a corporation’s stockholders’ equity. Mark as wrong Mark as...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
part will be affected. 1. Depreciation Expense. Operating Right! Depreciation is added back to net income in the operating activities section because the company's net income was reduced by the depreciation expense...
What is a comparative income statement? A comparative income statement will consist of two or three columns of amounts appearing to the right of the account titles or descriptions. For example, the income statement for...
What is the income summary account? Definition of Income Summary Account The Income Summary account is a temporary account used with closing entries in a manual accounting system. (Computerized accounting systems may...
The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
What is the statement of comprehensive income? Definition of Statement of Comprehensive Income The statement of comprehensive income is one of the five financial statements required in a complete set of financial...
Often this account appears as a line in the retained earnings section of stockholders’ equity (balance sheet) and will show the year-to-date net income. The reason is that some accounting software will not put the...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
An income statement that has more than one subtraction in arriving at net income. An income statement showing gross profit is an indication it is a multiple-step income statement.
A company’s income statement which reports each item as a percentage of net sales.
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined...
and matching principle. Book value of an asset is: the asset’s cost minus the asset’s accumulated depreciation. Book value of the liability Bonds Payable is the combination of the following: Maturity or par value of...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
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...
An example of a variable cost is the cost of flour for a bakery that produces artisan breads. The greater the number of loaves produced, the greater the total cost of the flour used by the bakery. An example of a fixed...
, Plant and Equipment. At that point, the depreciation of the addition will begin. (If a company is constructing an assembly line or a huge machine that will take time to build, the amounts would also be accumulated in...
and is recorded in a contra asset account Accumulated Depreciation. The balance in Accumulated Depreciation is reported on the balance sheet as a separate deduction from the assets’ historical costs. Advantage of...
Employer payroll taxes include an employer’s portion of Social Security and Medicare taxes and the state and federal unemployment taxes.
A current liability that includes payroll taxes withheld from employees and payroll taxes that are levied on an employer but have not yet been remitted.
What are sales taxes? In the United States, most of its 50 States assess a sales tax, which is a tax on sales to the end user. For example, in the state of Wisconsin a retailer must collect a 5% sales tax and perhaps...
A liability account that reports the amount of taxes that a company owes as of the balance sheet date.
Employees’ Wages Not Matched by Employer Examples of payroll taxes which are withheld from an employee’s gross wages and then remitted to the government agency by the employer include: Federal income taxes State and...
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