This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
The owner’s equity accounts are the owner’s capital account and the owner’s drawing account. During the year the income statement accounts (revenues, expenses, gains, losses), the owner’s drawing...
A listing of the accounts available in the accounting system in which to record entries. The chart of accounts consists of balance sheet accounts (assets, liabilities, stockholders’ equity) and income statement...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
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...
transactions. LOSSES OSSELS Unscramble LOSSES ESLSOS Unscramble 9. __________________ to owners will decrease owner's equity. DISTRIBUTIONS UDSRITNBOITIS Unscramble DISTRIBUTIONS DSBSIINIURTOT Unscramble 10. The...
What does it mean to rotate stock? Definition of Rotating Inventory Stock To rotate stock means to arrange the oldest units in inventory so they are sold before the newer units. The goal is to avoid losses due to getting...
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...
for the year are less than the expenses and losses, the result is a net loss that reduces the normal credit balance in the Retained Earnings account.) The balance in the Retained Earnings account is also decreased when...
of goods sold, SG&A) and losses. Revenues are sometimes referred to as the top line amount on a company’s income statement. Earnings or net income are often referred to as the bottom line amount on the income...
What is a single-step income statement? Single-Step Income Statement Definition A single-step income statement arrives at a company’s net income in one step or subtraction: [total revenues and gains] – [total...
and expenses and the gains and losses are added/subtracted from the operating income The important subtotals on the multiple-step income statement are convenient for the reader/user of the income statement....
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
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...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
How can a company with a net loss show a positive cash flow? Definition of Net Loss A net loss occurs when a company’s revenues and gains are less than its operating expenses, other expenses and losses. The net loss or...
Where does the purchase of equipment show up on a profit and loss statement? Reporting the Purchase of Equipment Assuming that the purchase of equipment is a long-term or noncurrent asset that will be used in a business,...
How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that...
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...
Liabilities Equity or net assets Investments by owners Distributions to owners Comprehensive income Revenues Expenses Gains Losses The above list is based on the FASB’s Statement of Financial Accounting Concepts No....
Operations of an entire division, subsidiary, or segment of a company where a formal plan exists to eliminate it from the company. (It involves more than pruning a product line of certain models of products.) The...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
How do the income statements of a sole proprietorship and a regular corporation differ? Definition of Income Statements of Sole Proprietorship and Regular Corporation The income statement of a sole proprietorship and a...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
on a multiple-step income statement prior to deducting selling, general and administrative expenses and prior to nonoperating revenues, nonoperating expenses, gains and losses. Example of Gross Profit Let’s assume...
, a contingent asset and gain will not be recorded in a general ledger account or reported on the financial statements until they are certain. [This is different from contingent liabilities and contingent losses, which...
in the noncurrent asset section entitled property, plant and equipment. Accounting rules also require that the plant assets be reviewed for possible impairment losses. Examples of Plant Assets Plant assets include: Land...
during the month, but the transactions had not been recorded in the accounts as of the end of the month To record the expenses, losses, and their related liabilities which were incurred during the month, but the...
of the accounting period by means of adjusting entries. The amounts for some accrued liabilities and their related expenses (or losses) may have to be estimated. Examples of Accrued Liabilities Some examples of accrued...
is a debit to the income statement account Bad Debts Expense. Some companies might use the description provision for bad debts on its income statement in order to report the credit losses that pertain to the period of...
that depreciation expense will beat its budget by $4,000 ($44,000 of actual depreciation versus the annual budget of $48,000). This favorable $4,000 is the controller’s cushion. The idea is that this will cushion the...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
other comprehensive income is not considered.) A corporation’s EBIT could be the same as its operating income. However, if the corporation has nonoperating revenues and/or gains and/or certain losses, the...
, gains, or losses are recorded in his or her account. When the employee retires, the pension or retirement benefit is based upon his or her account balance. A 401(k) is an example of a defined contribution pension plan....
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