Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its...
Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
How do drawings affect the financial statements? Definition of Drawings Drawings are the withdrawals of a sole proprietorship’s business assets by the owner for the owner’s personal use. The drawings or draws by the...
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.
collects $100,000 of its accounts receivable, the asset Cash is increased by $100,000 and the asset Accounts Receivable is decreased by $100,000. There is no change to stockholders' equity. (There is no change to...
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...
income (loss)” Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter the...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
a positive net income of $75,000. As a result, the corporation’s balance sheet at the end of the second year will report Retained earnings $115,000. In its third year the corporation had a net loss of $195,000....
How do you reduce the break-even point? Definition of Break-even Point The break-even point is the number of units or amount of revenues needed for the company’s income statement to report zero net income or zero net...
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
the heading income statements. Seasoned business owners often refer to this financial statement as the P&L, which is short for profit and loss statement. The word statements (instead of statement) is used in the...
Are dividend payments shown as an expense on the income statement? Definition of Dividend Payments The cash dividends paid to stockholders are a distribution of the corporation’s earnings. Dividends are not an expense...
What is comprehensive income? Definition of Comprehensive Income Comprehensive income for a corporation is the combination of the following amounts which occurred during a specified period of time such as a year,...
year with a zero balance. The temporary accounts include the income statement accounts (revenue, expense, gain, loss, income summary) and also the drawing account of a sole proprietorship. The balances in these accounts...
How do you calculate the break-even point in terms of sales? Definition of Break-even Point in Sales Dollars The break-even point in sales dollars can be calculated by dividing a company’s total fixed expenses by the...
suppliers. If you purchase an asset and the sales tax is required, the sales tax should be recorded as part of the cost of the goods or services received. For example, if you were required to pay sales tax on the new...
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...
collects one of its accounts receivable, it affects two current asset accounts: Accounts Receivable (which decreases), and Cash (which increases) As a result: The total amount of current assets does not change. Current...
statement information will be incorrect: The balance sheet at the end of the current accounting period will report too little inventory. This in turn means the amount of current assets, the amount of total assets, the...
. There is no regulation that requires the tax depreciation to be the same as the book depreciation in a given year. (However, over the life of an asset, the total depreciation expense for both will be limited to the...
Unscramble 4. The type of account involved with the deferral of revenues. LIABILITY IBLLIITAY Unscramble LIABILITY AIBTLIILY Unscramble 5. This type of account is part of the entry to accrue revenues. ASSET ETASS...
is calculated using this category or classification of assets and liabilities. CURRENT RURNTEC Unscramble CURRENT TUERNRC Unscramble 2. The word pertaining to a company's ability to pay its obligations when due....
because the adjusting entry was omitted? Select... Asset Liability Stockholders' equity 15. A corporation issued its balance sheet without an accrual adjusting entry for the interest it had earned on an investment...
Right! Accumulated Depreciation is a contra asset account (its balance is a credit balance even though assets usually have debit balances) shown in the section of the balance sheet section Property, Plant and Equipment....
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 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...
they are earned and reports expenses when they occur. Mark as wrong Mark as right conservatism When an accountant has two alternatives for financial accounting, the amount reported should be the one that results in a...
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...
Inventory Prepaid Expenses Investments Land Buildings Furniture and Fixtures Vehicles, and more Generally, asset accounts will have debit balances and their account balances will be increased with a debit entry....
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 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...
Depreciation for the car’s accumulated depreciation Credit the asset account containing the car’s cost Credit the account Gain on Sale of Vehicles for the amount necessary to have the total of the debit amounts...
At what point are revenues considered to be earned? Revenues, which are derived from an entity’s main activities such as the sale of merchandise or the performance of service, are considered to be earned when the...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
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...
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
such as gasoline. The delivery surcharges should not be reported as nonoperating revenues or other income. Nonoperating revenues or other income items would be outside the main activities of the retailer and...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
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