Accounting Principles Accounting Principles The financial statements distributed to people outside of a U.S. corporation must be in compliance with generally accepted accounting principles (GAAP or US GAAP). US GAAP...
Accounting Principles Accounting Principles The financial statements distributed to people outside of a U.S. corporation must be in compliance with generally accepted accounting principles (GAAP or US GAAP). US GAAP...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
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...
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...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
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...
in Allowance for Doubtful Accounts reduces the amount reported on a company’s balance sheet for accounts receivable to the amount that is expected to be collected. The balance sheet account Allowance for Doubtful...
What is the interest coverage ratio? Definition of Interest Coverage Ratio The interest coverage ratio is a financial ratio used as an indicator of a company’s ability to pay the interest on its debt. (The required...
that will be turning to cash.) For financial statement purposes the allowance method is the better method since 1) the balance sheet will be reporting a more realistic amount that will be collected from the company’s...
What is the difference between adjusting entries and correcting entries? Definition of Adjusting Entries Generally, adjusting entries are required at the end of every accounting period so that a company’s financial...
classified into three groups: Raw materials used in the product Direct labor used to make the product Manufacturing overhead incurred to make the product Since the manufacturing overhead costs are indirect costs, they...
What is the difference between unearned revenue and unrecorded revenue? Definition of Unearned Revenue In financial accounting, unearned revenue refers to money received prior to being earned. It is also referred to as...
of significant noncash changes in the above sections Definition of Free Cash Flow Free cash flow is a metric often used by financial analysts. It is calculated by using two amounts reported on a company’s statement of...
of Long-term Assets Long-term assets include long-term investments in financial securities, property, plant, equipment, and intangible assets. Definition of Proceeds from Long-term Assets The money a company receives...
of the amount of the accounts receivable that will be turning to cash, since some customers may not pay the full amount owed to the company. The credit balance in the allowance account is an estimate amount in an...
that is used up or expires in the accounting period. As a result, the cost is reported as an expense on the income statement. Definition of a Product Cost A product cost is a cost that is either directly or indirectly...
. Which financial statement reports the assets and liabilities of a company? Select... Balance sheet Cash flow statement Income statement 17. The balance in a corporation’s account Retained Earnings should be...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
balance sheet (or) statement of financial position This financial statement reports a company’s assets, liabilities, and stockholders’ (or owner’s) equity as of the final moment of the accounting period. balance...
statement account Insurance Expense and a credit to the current asset Cash. Your company prepares monthly financial statements at the end of each calendar month. The following questions pertain to the adjusting entry...
that the objective of the accounting process is to have accurate financial statements. In this case we want an income statement which reports an accurate amount of cost of goods sold, and the resulting gross profit...
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...
Financial Statements Video Training Part 6 Balance sheet: current liabilities (notes payable, accounts payable, accrued expenses, customer deposits) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
Bookkeeping Video Training Part 1 Accounts: record each transaction in two accounts, debits = credits, T-accounts, amounts reported on financial statements Must-Watch Video Learn How to Advance Your Accounting and...
Bookkeeping Video Training Part 9 Adjusting entries: depreciation expense and accumulated depreciation reported on financial statements, useful life of the asset Must-Watch Video Learn How to Advance Your Accounting and...
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
’ depreciation expense for an asset will likely add up to the same total. The difference between book and tax depreciation leads some people to say, “Oh, the company has two sets of books.” The fact is the company...
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 Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
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...
time—no inflation. 4. Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements? Conservatism...
liabilities: Additional Information on the Accounting Equation As you may have noticed, the accounting equation is similar to the balance sheet (or statement of financial position) which is one of the main financial...
. If a corporation issues 10% Preferred Stock $100 Par on a day when the financial markets demand 9%, this corporation's 10% Preferred Stock will sell for __________ more than its par value. 11. If a common stock...
of a new warehouse should be depreciated. Select... True False 3. The entry to record depreciation includes a credit to the account __________ Depreciation. 4. The depreciation method likely to be used on a company’s...
What is a compilation? Definition of Compilation A compilation refers to a company’s financial statements that have been prepared or compiled by an outside accountant. A compilation is usually part of an accounting...
. On the other hand, operating losses make it difficult to obtain such financing. Working Capital Ratios In addition to calculating the amount of working capital (current assets minus current liabilities), there are two...
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...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement...
Featured Review
"I discovered AccountingCoach while I was teaching an Accounting 1 class at the college I work at and provided the website to my students to supplement their learn experience. I know it made a difference! I am a Small Business Development Center adviser and workshop presenter and I provide the AccountingCoach website to my clients and workshop attendees to help them learn accounting. AccountingCoach is a great resource for small business people!" - Ida 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: