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 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 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...
, Sales, will collect all of the amounts from the sale of merchandise. Most accounting systems require that every transaction will affect two or more accounts. For example, a cash sale will increase the Cash account and...
Assume that in the most recent month, a retailer had $220,000 of merchandise sales. It also allowed customers $2,000 in early payment discounts. Some customers were allowed to return goods that had been sold for $4,000...
). Examples of Nonoperating Expenses and Losses A common example on a nonoperating expense is the interest expense incurred by a retailer or manufacturer. The retailer’s main operations are purchasing and selling...
What is carriage inwards? Definition of Carriage Inwards Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered with terms FOB shipping point....
or vendor. Hence, a bill payable is also known as an unpaid vendor invoice. Examples of Bills Payable Examples of a bill payable include a monthly telephone bill, the monthly bill for the electricity used, a bill for...
income. The retailer’s main operations are purchasing and selling merchandise. Investing its idle cash in interest-bearing investments is outside of its main or central operations. Gains often involve the disposal of...
What are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
the balance per bank.) Mark as wrong Mark as right deposit in transit (or) outstanding deposit This refers to a receipt that a company has recorded in its general ledger, but it is not yet reported in the bank account....
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
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...
. Voiding a check that has been outstanding for several months will increase the adjusted balance per __________. Select... bank only book only bank and book 19. Which of the following does not describe canceled checks?...
(or Stockholders’) Equity 16. When a sale of merchandise occurs, the Sales account will be __________. Select... debited credited 17. The normal entry to the Sales account also has the effect of __________ owner’s...
term FOB destination indicates that the buyer will receive title to the goods when the goods arrive at the buyer’s location. At that point the buyer will have an account payable (and the seller will have an account...
What is the difference between inventory and the cost of goods sold? Definition of Inventory Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. A...
Receivable Accounts receivable is a current asset account in which a company records the amounts it has a right to collect from customers who received goods or services on credit. Examples of Accounts Payable and...
of merchandise on May 15, but allows the customer to pay on June 15. On May 15, the company will credit its income statement account Sales and will debit its current asset account Accounts Receivable. (When the customer...
first year the company had $65,000 of profit, but may end the year with $0 cash. Other examples where cash is paid out, but the profits are not reduced at the time of the payment, include prepayments of insurance...
What is a multiple-step income statement? Multiple-Step Income Statement Definition A multiple-step income statement presents two important subtotals before arriving at a company’s net income. For a company that sells...
working capital will increase. If a company uses its cash to pay for a new vehicle or to expand one of its buildings, the company’s current assets will decrease with no change to current liabilities. Therefore working...
for the gross amount received, but the IRS may use the term income to mean the gross amount received. While accountants use the term revenues when referring to a company’s sales of its merchandise, the same...
the seller or the buyer. Example of Trade Discounts A distributor of merchandise may have a single catalog which displays a single price for each product. However, the distributor allows a trade discount from the...
unsecured claim is likely to be settled only after the secured creditors’ claims and the priority unsecured creditors’ claims are settled. Example of Unsecured Claim Assume that on July 1, Supplier Company sells...
one type of inventory, namely merchandise. Manufacturers will have three or four categories of inventories: Raw materials Work-in-process Finished goods Manufacturing and packaging supplies Manufacturers are required to...
the collection of the money owed to the company (part of the company’s accounts receivable and the customer’s accounts payable), the company’s invoice may state credit terms such as 2/10, net 30. For example,...
, each customer’s remittance, return of merchandise, discounts, and so on. With these details in the subsidiary ledger, the Accounts Receivable account in the general ledger can report summary amounts for the accounts...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
season is finished, the merchandise returns from holiday sales are completed, and the January clearance sales have taken place. [The 52-53 week periods with 13-week quarters allows for better comparisons than calendar...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
of buying and selling merchandise, providing services, etc. Basically, the cash from operating activities includes the company’s cash flows except for those reported as cash flows from 1) investing activities (buying...
revenue that had been prepaid by a customer, the company’s balance sheet’s liability deferred revenue will decrease and retained earnings will increase. Examples of the Effect of Revenue on the Balance Sheet...
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...
’ __________. 10. Purchasing supplies on credit will be recorded with a credit to the account __________ __________. 11. Sales of merchandise and fees earned from providing services are examples of the income statement...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
receivable and notes receivable that result from sales of merchandise are referred to as __________ receivables. 13. The account Allowance for Doubtful Accounts could temporarily have a __________ balance if the company...
Are the goods purchased by a retailer an expense or an asset? Definition of Goods Purchased by a Retailer The goods purchased by a retailer are the products or merchandise that it buys and plans to resell. The goods that...
are recorded as part of the cost of the van. The total cost of the van will then be charged to depreciation expense over the van’s useful life. Examples of Sales Tax If a company sells $100,000 of merchandise that is...
the cash is received, after the cash is received, or at time that the cash is received. (Note that for income tax reporting, smaller companies may use the cash basis of accounting.) Examples of Revenue Common examples...
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