What are sales taxes? In the United States, most of its 50 States assess a sales tax, which is a tax on sales to the end user. For example, in the state of Wisconsin a retailer must collect a 5% sales tax and perhaps...
What are sales taxes? In the United States, most of its 50 States assess a sales tax, which is a tax on sales to the end user. For example, in the state of Wisconsin a retailer must collect a 5% sales tax and perhaps...
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
What are gross sales? Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the total will be adjusted to the...
What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise. This of course will reduce the...
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...
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
are commonly referred to as the company’s fixed assets or plant assets. Generally, the property, plant and equipment assets are reported at their cost followed by a deduction for the accumulated depreciation that...
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...
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...
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...
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
A term used when referring to property, plant, and equipment. Fixed assets other than land are depreciated.
The exchange or trade-in of a long-term asset for a completely different long-term asset. For example, exchanging an antique car for land.
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
Often referred to as fixed assets. This would include long term assets such as buildings and equipment used by a company. Plant assets (other than land) will be depreciated over their useful lives.
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...
. This is also true for the firm’s brand names that resulted from effective marketing, highly satisfied service, and expertise in specialty services that are in great demand. Another limitation of the balance sheet...
and $900,000 is credited to a contributed capital account such as Common Stock. Assume that two days later the corporation purchases real estate consisting of land and a warehouse/office building for $700,000....
containing each account’s unadjusted balance, Adjustments containing any adjusting entries, Adjusted Trial Balance containing the combination of the unadjusted balance and any adjustments, Income Statement containing...
. 11. Both Land and Land Improvements will generally be depreciated. True Wrong. Land is generally not depreciated. It is assumed that the useful life of land will be indefinite. Land Improvements are depreciated,...
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.
to the readers of the balance sheet. However, if none of the coal has been delivered as of the balance sheet date, the utility company will not report a liability amount. Companies will often have some contingent...
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...
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...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
. 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...
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 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...
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...
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,...
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...
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...
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...
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...
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...
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)....
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