Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
to one of its suppliers in another region of the country. As of December 31, the check has not yet cleared the company’s checking account. Therefore, this $8,120 check is an uncleared cheque or an outstanding check....
discussing disinvestment. For example, an electric generator manufacturer might sell off its consumer generator product lines and manufacturing facilities in order to raise money that can be used to expand its...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
balances). However, the debit balance amounts are entered in one column and the credit balance amounts are entered in another column. Each column is then summed to prove that the total of the debit balances is equal to...
subscribe to this publication. It contains the financial ratios for 740 industries based on the financial statements of more than 265,000 small and mid-sized companies. Another source for your industry’s financial...
smaller (fewer products, fewer customers, fewer managers). Now the company’s more sophisticated operations require more detailed reporting that is segmented by processes and/or by each manager’s area of...
, another company in an industry where the credit terms are net 60 days will need a greater amount of working capital. Having an approved credit line with no borrowing allows a company to operate comfortably with a small...
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...
in the Inventory account.) Matching the latest/recent/higher costs against current sales results in less profit, less taxable income, and less income tax expense than FIFO or an average cost. Average Wrong....
In accounting, what is meant by relevant costs? Definition of Relevant Costs Relevant costs are future costs that will differ between two or more alternative actions. Expressed another way, relevant costs are the costs...
will result in the company’s health insurance expense per biweekly pay period of $225 for the employee. Another way to record the withholdings is to credit a current liability account such as Employee Withholdings for...
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...
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
What accounting entry is made when a company receives an order for its goods or services? Definition of Accounting Entry When an Order is Received At the time when a company receives a customer’s order (without...
in the checking account If there is an error in the company’s cash records, there will be a related error in another account because of the double-entry system of accounting. If a dishonest person is embezzling money...
What is goodwill? Definition of Goodwill In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase...
payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
What are accounting ratios? Definition of Accounting Ratios Accounting ratios, which are also known as financial ratios, are one part of financial statement analysis. Accounting ratios will often relate one financial...
charge where it ain’t. Another situation you will likely encounter when reconciling the bank statement involves outstanding checks. Outstanding checks are the checks that have been written (and recorded) by the...
its owner (as would be the case with a corporation). However, the sole proprietor may be able to register as a limited liability company in order to limit his or her personal liability. You should seek professional...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
. (In the year that a company switched from FIFO to LIFO, the financial statements must communicate clearly that the FIFO consistency had ended.) Reliability Another qualitative characteristic of accounting is...
What is the contribution margin ratio? Definition of Contribution Margin Ratio The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the...
What is notes receivable? Definition of Notes Receivable Notes receivable is an asset of a company, bank or other organization that holds a written promissory note from another party. (The other party will have a note...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
What are the typical items reported as current liabilities? Definition of Current Liabilities Current liabilities (also known as short-term liabilities) for most companies are the obligations that must be paid within one...
and equipment. If the required test of impairment indicates that a loss must be recorded on its plant and equipment, its book value must be reduced and the resulting loss reported on its income statement. A second...
of the company’s most valuable assets. However, if they were developed by the company (as opposed to purchased from another company), there may be no amount to report on the balance sheet. Examples of Intangible...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
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...
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 Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
What is the difference between public companies and public sector? Definition of Public Companies Public companies are those businesses owned by individuals (and not by a government). Definition of Publicly-Held...
assume that a company’s product had a cost of $100 at the start of the year, at mid-year the cost was $105, and at the end of the year the cost was $110. Which cost would you match with the sale of one item at the end...
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