Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
A term associated with petty cash. Replenish means to return the amount of actual cash in the petty cash box back to the amount appearing in the general ledger account Petty Cash. This is done whenever the amount of...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
A liability account that reports an insurance company’s premiums received from its insured that have not yet been earned. For example, if the insurance company receives $600 on January 27 for an insured’s...
Financial statements that reflect the total economic entity. For example, on a consolidated income statement a corporation having several subsidiaries would report the total of all of its companies’ sales that were...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
. If any of the items recorded in Sundry Expenses begin to occur frequently and/or become significant, a new account should be opened for such items. Sundry expenses could also refer to a line on a company’s...
! The amounts needed (total current assets and total current liabilities) are reported on the balance sheet. Cash Flow Statement Wrong. Income Statement Wrong. More Than One Will Be Needed Wrong. 3. The operating cycle...
receivable is $92,000. Adjustments to the Allowance account are reported on the income statement as bad debts expense. Now, let’s assume that a company’s inventory has a cost of $15,000. However, at the end of the...
investment’s interest that is earned in December but the money will not be received until a later accounting period. This interest should be recorded as of December 31 with an accrual adjusting entry that debits...
proprietor working in her own business. For example, Jane works as a sole proprietor and her business reported a net income of $30,000 for the year. Since a sole proprietor does not receive a salary or wages, there is...
proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The current year net income might be in the temporary revenue and expense accounts and...
incentive for a profitable corporation to issue bonds instead of stock is that the interest is __________ for income tax purposes whereas dividends are not. 10. Bonds that can be exchanged for a predetermined number of...
Break-even Point Break-even Point The break-even point is the level of sales that result in a business having a net income of zero. In other words, its revenues will be exactly equal to its expenses. The break-even point...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
of goods sold on the income statement. Inventory is important for a company’s profitability and survival. For instance, if a retailer or manufacturer does not have sufficient inventory of requested items, the result...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
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 Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
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....
. 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...
classify and report their expenses on their internal income statements by the following functions: Manufacturing (further classified by production departments and factory service departments) Selling, general...
+ 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)...
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...
What is the difference between loan interest and bank loan repayment? Definition of Loan Interest Loan interest is the expense a borrower incurs for using a lender’s money. Loan interest is also the income earned by a...
within one year The principal portion of a long-term loan that must be paid within one year Wages payable Income taxes payable Interest payable Other accrued expenses payable Deferred revenues and customer deposits Join...
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...
is as follows: Debit to Other Receivables-Advances to Employees for $800 Credit to Cash for $800 When the company earns interest on an employee loan or advance, the company should credit the amount earned to Interest...
Which financial statement shows a corporation's worth? Not one of the financial statements will show a corporation’s worth. The balance sheet, income statement, statement of cash flows, and stockholders’ equity...
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...
will be matched with the $60,000 of increased electricity revenues it will be reporting on its five annual income statements. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
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...
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...
accounts such as Accounts Payable, Notes Payable, Accrued Liabilities, Deferred Income Taxes, etc. Owner’s (Stockholders’) equity accounts including Owner’s Capital, Common Stock, Retained Earnings, and others...
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...
. The entry will debit Loan to Employee for $5,000 and will credit Cash for $5,000. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by debiting Interest...
.), 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...
. 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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