This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
the regular quarterly divided on its common stock, the corporation's liabilities will include the omitted dividend. True Wrong. Dividends become liabilities only if the board of directors declares them. False...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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...
How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
. In essence, the cost of goods sold is being matched with the revenues from the goods sold, thereby achieving the matching principle of accounting. When the cost of goods sold is subtracted from net sales, the result is...
Are direct costs fixed and indirect costs variable? Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine, geographic market, etc. (which are...
of a company’s fixed expenses assists in understanding how the retailer’s net income will change as volume changes. The total amount of fixed expenses can also be used to quickly estimate a company’s break-even...
referred to as a __________–__________ cost. 5. The additional quantity of inventory held by a company so that it will not run out of stock when there is an unexpected increase in demand for its product is known as...
What is an imprest system of petty cash? Definition of Petty Cash Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. The amount of petty cash (also...
What is an accounting period? Definition of Accounting Period An accounting period is the period of time covered by a company’s financial statements. Common accounting periods for external financial statements include...
of accounting principles and concepts. Perhaps a company increases its allowance for doubtful accounts with an increased bad debts expense only in the years with high profits. Then in a year with low profits, the...
, between a company’s balance sheet date of December 31, 2023 and the time that the financial statements are distributed on January 31, 2024, it is possible a significant event occurs or information becomes known that...
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
account with the title Inventory Change or with the title (Increase) Decrease in Inventory. This account is presented as an adjustment to purchases in determining the company’s cost of goods sold. Example of Inventory...
and the net income will be larger. Example of Absorption Costing Causing an Increase in Net Income Assume a company has no beginning inventory and it plans to manufacture 100,000 units. Also assume that its annual fixed...
of Depreciation Being a Direct Cost and/or an Indirect Cost Assume a company has a variety of manufacturing departments, one of which is the Finishing Department. The Finishing Department’s equipment is used for...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
basis, such as $50,000 per year. Many employees working in a company’s general office will be paid a salary. Often the salaries are paid semi-monthly. That is, one pay date will be the 15th day of the month for...
years all expressed in easier to absorb amounts. Example of Trend Analysis Assume you want to see the trend of a service company’s revenues, net income, and number of clients during the years 2017 through 2023. With...
there are expected to be 560,000 MHs. Using normal costing, the company applies the manufacturing overhead to products at a rate of $22.50 per MH ($12,600,000/560,000 MH) throughout the year. Using actual costing,...
discounted cash flow technique for evaluating investments.] Example of Net Present Value Assume a company is considering investing $100,000 today in a project that provides $30,000 at the end of each year for 5 years....
cash amounts could be described as any of the following: desired rate of return target rate of return time value of money company’s cost of capital incremental interest rate of the borrower the inflation rate, etc....
is __________ expense. 18. The first section of the statement of cash flows reports the amount of cash provided or used by a company’s __________ activities. Select... financing investing operating 19. The second...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
This is the expected ending balance for the general ledger account Allowance for Doubtful Accounts. Mark as wrong Mark as right aging of accounts receivable This procedure sorts the amounts owed to a company by its...
amount due for the sales invoice and might even show a negative amount due from the customer. If your company mails statements to its customers, the customer should be able to see its double payment when reviewing the...
Is advertising an asset or an expense? Definition of Advertising Expense Advertising is the amount a company incurs to promote its products, brands, and image via television, radio, magazines, Internet, etc. Since the...
assumption such as 1) first-in, first-out or FIFO, 2) last-in, first-out or LIFO, 3) weighted average, etc. If LIFO is used, the company must disclose what the dollar amount of inventory would have been if FIFO had been...
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...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
to the account Cash. Effect of Drawings on the Financial Statements The owner’s drawings will affect the company’s balance sheet by decreasing the asset that is withdrawn and by the decrease in owner’s equity. The...
What does it mean to reclassify an amount? Definition of Reclassify an Amount To reclassify an amount likely means to move an amount from one general ledger account to another general ledger account. Example of...
will be reported as an expense. Example of a Cost A company’s property insurance bill for the next six months of insurance shows a cost of $6,000. Initially the cost of $6,000 is reported as the current asset Prepaid...
of Adjusting the Allowance for Doubtful Accounts The balance in the account Allowance for Doubtful Accounts should be the estimated amount of the company’s receivables that will not be turning to cash. For example, if...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
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