What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
What is an impairment? Definition of Impairment The term impairment is associated with an asset currently having a market value that is less than the asset’s book value . A test is done to determine whether the...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
in the business minus the owner’s draws or withdrawals from the business plus the net income (or minus the net loss) since the business began. Owner’s equity is viewed as a residual claim on the business assets...
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
A potential loss that is dependent upon some future event occurring or not occurring. If the loss is probable and the amount can be estimated, then the loss and a liability are recorded with a journal entry. If the loss...
Also referred to as the P & L and the income statement. To learn more, see Explanation of Income Statement.
A loss from holding an asset and the loss has not yet been reported in the financial statements.
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
See contingent loss.
A loss that occurs by holding an asset. Holding losses might be recorded on the income statement or they might not be recorded depending on the asset and the amounts.
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
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...
that an asset is placed into service and one-half year of depreciation in the final year of the asset’s life. Mark as wrong Mark as right disposal This term includes a sale or a retirement of a plant asset (such as a...
balance for asset, expense, and loss accounts. debit This term indicates the left side of a general ledger account. It is also the normal balance for asset, expense, and loss accounts. Mark as wrong Mark as right...
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
One of the amounts used in determining the amount of interest to be capitalized when a company self-constructs certain long-term assets.
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
. Liquidation value is subjective and the amount can vary significantly depending on the assumptions made. The matching principle requires that the cost of plant assets be allocated to depreciation expense. This means...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
is the __________ __________ __________ __________. 12. If a corporation sells one of its plant assets for a cash amount that is less than the asset’s book value, a __________ on the sale of a plant asset will be...
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...
. Current assets are reported on a company’s balance sheet in their order of liquidity. Since cash is the most liquid asset, it will appear first followed by the current assets that can be quickly turned into cash:...
What is a toxic asset? I would define a toxic asset as an investment whose value has dropped significantly and there is no market in which to sell the asset. To illustrate, let’s assume that at the peak of the real...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
See prepaid expense.
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
The mathematical result of sales revenues divided by average total assets during the period of the sales.
Are retained earnings an asset? Definition of Retained Earnings Usually, retained earnings consists of a corporation’s earnings since the corporation was formed minus the amount that was distributed to the stockholders...
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