Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Amounts spent for property, plant and equipment.
The acronym for original equipment manufacturer.
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
months later, the utility will record the purchase of only the coal that has arrived and the related account payable. Likewise, on the day the contract is signed, the coal company does not have a sale of the coal...
from the bank Collecting $4,000 from a sale that was recorded one month earlier Disposing of a company vehicle and receiving cash that is equal to the vehicle’s book value Receiving $1,000 from an employee who had...
expense is first reported on a company’s income statement when a customer’s account is actually written off. Often this occurs many months after the credit sale was made and is done with an entry that debits Bad...
a repair service to get its equipment back in working order. On January 5, AVCO received the repair bill for the quoted cost of $8,000 with terms of net 10 days. AVCO’s first accounting entry for the repair was made...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
What is capital budgeting? Definition of Capital Budgeting Capital budgeting is a process used by companies for evaluating and ranking potential capital expenditures or investments that are significant in amount. A few...
as a long-term asset. Noncurrent assets are reported under the following balance sheet headings: Investments (long-term) Property, plant and equipment Intangible assets Other assets Examples of Noncurrent Assets...
not mean that the general ledger is free of errors. For instance, recording a debit entry into the Equipment account instead of recording the debit in the Equipment Repairs Account will not be uncovered by the trial...
expense over its useful life Depreciable assets are reported on the balance sheet under the asset heading property, plant and equipment. Examples of Depreciable Assets Some examples of depreciable assets include the...
of property, plant, and equipment. Depreciation of the Building and Equipment is a Fixed Cost The depreciation expense associated with a company’s buildings and machinery is considered to be a fixed cost or a fixed...
(or to its estimated salvage value). Example of Reporting a Fully Depreciated Asset on the Balance Sheet A fully depreciated asset that continues to be used is reported at its cost in the Property, Plant and Equipment...
that on January 2 a company has some of its office equipment repaired. The cost of the repair is $300 and is to be paid by January 31. On January 4, the invoice for the repair is recorded with a $300 debit to Repairs...
deferred revenues (or) unearned revenues These amounts have been received from customers in advance of completing a sale or service. They are reported as a liability until they become earned. deferred revenues (or)...
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...
a liability as of December 31? Select... Yes No 8. Who should pay the shipping costs? Select... Buyer Supplier 9. When goods are purchased using credit, we say that the goods were purchased on credit or were purchased...
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...
) of accounting. The accrual method means that 1) revenues and a related receivable will be reported when they are earned and collection is assured, and 2) expenses and a related payable will be reported when an expense...
on December 31 was already in bankruptcy condition, the corporation must adjust its December 31 balance sheet by reducing its net receivables by $200,000 and reporting bad debts expense of $200,000 on its income...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
A reference to stockholders’ equity. See paid-in capital. Also an adjective that references property, plant and equipment used in a business; for example, capital expenditures and capital budgeting.
The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
The time required to set up a piece of production equipment.
A balance sheet with classifications (groupings or categories) such as current assets, property plant and equipment, current liabilities, long term liabilities, etc. To learn more, see Explanation of Balance Sheet.
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
Noncurrent assets. Assets that are not intended to be turned into cash or be consumed within one year of the balance sheet date. Long-term assets include long-term investments, property, plant, equipment, intangible...
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