will not solve the problem.) It is also important to realize that companies within the same industry may apply accounting principles differently. Some companies may be conservative in their accounting, while another may...
will not solve the problem.) It is also important to realize that companies within the same industry may apply accounting principles differently. Some companies may be conservative in their accounting, while another may...
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.
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...
. The retailer can record the delivery surcharges in a separate operating revenue account. In other words the sales revenues account could be used to record the revenues excluding the surcharges and then another sales...
by multiplying both the “2%” and the “20 days” by 18 (in order to get close to the 365 days in a year). The result is a per annum rate of approximately 36%. Another example involves a business charging its...
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account....
opportunity to be producing profitable output during the setup time is not an out-of-pocket cost. (The cost of not earning profits during the setup time, known as an opportunity cost, is often far greater than the...
How should the sale of gift certificates be recorded in the general ledger? Definition of Gift Certificates Gift certificates (and gift cards) are often sold by a retailer to a buyer for cash. The buyer can then redeem...
of the land. Example of Sale of Land Assume that the retailer had purchased the parcel of land 15 years earlier for $200,000 in order to add another retail store. The retailer now decides to sell the parcel for...
. If there is a day when the bond buyers demand an interest rate of 6.2% then the bond’s value on that day will be less than $100,000. If on another day the bond buyers demand 5.9% interest, the bond’s value on that...
What is an escrow payment? An escrow payment is an amount deposited with another party and it is to be released only for its specified purpose. The following is one example of an escrow payment. A borrower and lender...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
) but has another asset: the right to $500 at the end of the lease. The landlord receives the $500, but has an obligation to return the security deposit at the end of the lease. The landlord received an asset (Cash of...
How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) the...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
are overlooked initially, they will be adjusting items to the balance per books in the bank reconciliation. If a rubber check is not redeposited by the payee, the payee must also reduce its general ledger cash account...
liabilities This balance sheet classification includes a company’s obligations that are due within one year of the balance sheet date and will require the use of a current asset or will create another current...
, patents, copyrights, and mailing lists are examples of __________ assets. 10. An obligation due within one year of the balance sheet date that will require the use of a current asset or create another current liability...
Accounting Basics Accounting Basics Accounting basics is often described by the following actions: Recording the vast number of transactions that a business (or other organization) experiences. Sorting and storing the...
Cash Flow Statement Cash Flow Statement The cash flow statement is officially known as the statement of cash flows (SCF). It reports the major cash inflows and outflows that have occurred during the accounting period...
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...
Amount Of Current Liabilities Right! The Total Amount Of Assets Wrong. The Total Amount Of Liabilities Wrong. 12. Which of the following is another name for the quick ratio? Acid Test Ratio Right! Current Ratio Wrong....
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...
of financial position is another name for the balance sheet and it reports a company's assets, liabilities, and owner's (or stockholders') equity usually at the final moment of the accounting period. 2....
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...
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...
reporting because of the __________ principle. 11. Company J has received a formal written promise from another party. The note specifies the dates that interest and principal will be paid. Company J will record the...
statement covers the period of time shown in its heading. 3. Amounts earned by a company in its main operating activities are known as __________. Revenues Right! This is the correct answer. Gains Wrong. Gains pertain...
. Select... increase decrease 7. The account Sales Discounts is likely to have a __________ balance. Select... debit credit 8. If a bank credits a company’s checking account for interest that the company has earned,...
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...
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...
is another way to assess a company's use of financial leverage. It indicates the percent of a company's total assets that were provided by creditors. The amount owed to creditors is the sum of a company's...
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...
receivable to another party. The sale may be with or without recourse. factoring accounts receivable This occurs when a company sells its accounts receivable to another party. The sale may be with or without recourse....
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...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Adjusting Entries Why Adjusting Entries Are Necessary Adjusting entries are required at the end of each accounting period so that a company’s financial statements reflect the accrual method of accounting. Without...
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 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...
by management 2. Which method or basis of accounting best measures the net income earned by a company during a short period of time? Select... Accrual Cash 3. Which of the following would you expect in the heading of a...
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