Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
sheet, statement of cash flows, and statement of stockholders’ equity. Mark as wrong Mark as right balance sheet (or) statement of financial position This financial statement reports a corporation’s assets,...
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...
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 Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Working capital is defined as current assets __________ liabilities....
prepares monthly financial statements. Select... an accrual a deferral 27. Customer Deposits and Deferred Revenues are two examples of __________ accounts. Select... asset liability revenue 28. When the same amount of...
to a customer who is located 2,000 miles away. The merchandise arrives at the customer’s location on January 2. Between December 30 and January 2, the merchandise is an example of goods in transit. If the terms are...
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
A revenue, expense, gain, or loss account. To learn more, see Explanation of Income Statement.
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Point of sale.
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
. DISCONTINUED NOUDISDETCIN Unscramble DISCONTINUED NDDOSUNEITCI Unscramble 15. If a corporation sells a plant asset for less than its ___________ value, the difference will be reported as a loss on the income statement....
A listing of the accounts available in the accounting system in which to record entries. The chart of accounts consists of balance sheet accounts (assets, liabilities, stockholders’ equity) and income statement...
The contra owner’s equity account that reports the amount of withdrawals of business cash or other assets by the owner for personal use during the current accounting year. At the end of the accounting year, the...
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
The long term asset category of a classified balance sheet which appears immediately after the current assets. Listed in this category would be a bond sinking fund, funds held for construction, the cash surrender value...
The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...
A major classification on the balance sheet. It is the second long term asset section after current assets. Included are land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks,...
One of the main financial statements. The balance sheet reports the assets, liabilities, and owner’s (stockholders’) equity at a specific point in time, such as December 31. The balance sheet is also referred...
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
Also referred to as peripheral activities. A company’s activities outside of its main activities of buying/producing and selling. Examples include a retailer’s financing function involving interest revenue...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
, Sales, will collect all of the amounts from the sale of merchandise. Most accounting systems require that every transaction will affect two or more accounts. For example, a cash sale will increase the Cash account and...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
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