the amount of the write-down (reduction) as a loss on its income statement. Examples of Impairment A meat packing plant in recent years invested large amounts in its plant and equipment. Since then, the company...
the amount of the write-down (reduction) as a loss on its income statement. Examples of Impairment A meat packing plant in recent years invested large amounts in its plant and equipment. Since then, the company...
and other adjusting entries Providing financial reports Today bookkeeping is done with the use of computer software. For example, QuickBooks (from Intuit) is a low-cost bookkeeping and accounting software package that...
accounts. (However, there could be an entry into the company’s computer system for scheduling the work or shipment, etc.) Reasons for No Accounting Entry When an Order is Received The following is the rationale for no...
Some of a manufacturer’s fixed assets include: Land, land improvements, buildings Machinery and equipment Trucks, automobiles Furniture and fixtures Computer systems Join PRO to Track Progress Mark the Question as...
. Borrowing money is outside of these businesses’ main or central operations. An example of a loss is the retailer’s disposal of one of its delivery trucks for a cash amount that is less than the truck’s carrying...
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
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...
of equipment This occurs when equipment is sold for more than its book value. The amount is deducted from net income in the operating activities section of the statement of cash flows using the indirect method. Mark as...
Is sales tax an expense or a liability? Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional city and/or county tax) that is paid by the buyer at the time of purchase. The sales tax...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
Are sales discounts reported as an expense? Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are...
What is the definition of net sales? Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company makes a sale, the general ledger...
This visual tutorial for the topic Income Statement presents the key components and formats used on a corporation's income statement (which is also known as the statement of operations or profit and loss statement)....
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
What is the significance of FOB Shipping Point and FOB Destination? Significance of FOB Shipping Point and FOB Destination The terms FOB shipping point and FOB destination have significance in accounting because they...
With this cost flow assumption the oldest costs in the ending inventory are determined after the year has ended. Mark as wrong Mark as right LIFO perpetual Under this cost flow assumption the most recent cost at the...
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...
What does 2/10 mean in accounting? Definition of 2/10 2/10 is part of an early payment discount that allows a customer or client to pay after the sale or service has been provided. This sales discount...
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
the amount of money currently on hand.) Expense accounts and loss accounts including Cost of Goods Sold, Wages Expense, Rent Expense, Interest Expense, Loss on Disposal of Equipment, Loss from Lawsuit, etc. (The debit...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
account Inventory is reduced through a credit to a contra inventory account, which is referred to as a valuation account. The debit in the entry to write down inventory is recorded in an account such as Loss on...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
and can be estimated, they are recorded at the time of the sale. The accounting entry will debit Warranty Expense and will credit Warranty Liability. If the estimated warranty costs are recorded at the time of the...
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
than the asset’s book value. Losses An example is the Loss on Sale of a Plant Asset which resulted from selling a plant asset for less than the asset’s book value. The net result (or combination) of these components...
activities supplemental information 27. The cash amount received from the sale of a plant asset. Select... operating activities investing activities financing activities supplemental information 28. The reported loss...
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...
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 revenue, expense, gain, or loss account. To learn more, see Explanation of Income Statement.
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
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.
Point of sale.
of the accounting period the inventory account is adjusted to the amount on hand. Perpetual Wrong. Under the perpetual method the Inventory account IS continuously or perpetually updated with each purchase or sale of...
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