What is a permanent account? Definition of Permanent Account In accounting, a permanent account refers to a general ledger account that is not closed at the end of an accounting year. The balance in a permanent account...
What is a permanent account? Definition of Permanent Account In accounting, a permanent account refers to a general ledger account that is not closed at the end of an accounting year. The balance in a permanent account...
is the cost of goods on hand, it makes sense to relate it to the cost of goods sold. Assume that during the past year a company’s inventory had an average cost of $10,000. (This was the average of the amounts in the...
What if an employee's actual vacation payment is greater than the amount that has been accrued? Let’s assume that a company’s accounting year ends on December 31 and the company has only one employee who worked...
to earn (reduce expenses) $50,000 each year for 10 year is really a simple decision. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
to Calculate the Inventory Turnover Ratio The calculation for the inventory turnover ratio is: cost of goods sold for a year divided by average inventory during the same 12 months. A higher inventory turnover ratio is...
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...
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
of Accounting for Goods Purchased Assume that a retailer begins the year with inventory having a cost of $800. It ends the year with inventory having a cost of $900. During the year the retailer purchased goods at a...
a contribution margin of $4 per unit (selling price of $10 per unit minus variable expenses of $6 per unit), the company’s break-even point in sales for the year is 75,000 units. Break-even Point in Billable Service...
from creditors (and the remaining 27% came from stockholders). 6. JamCorp’s income statement for its most recent year reported the following: Net sales $500,000 Cost of goods sold $350,000 Selling and admin expenses...
Are Connected To illustrate the connection between the balance sheet and income statement, let’s assume that a company’s owner’s equity was $40,000 at the beginning of the year, and it was $65,000 at the end of...
How do you calculate the average balance in accounts receivable? The average will be more representative if you include additional balances in the computation. For example, if you compute the average balance for the year...
, which of the answers will cause a corporation’s stockholders’ equity to increase? Select... Buying a building on credit Declaring and paying dividends to shareholders Performing services with credit terms 24. At...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. When an asset has the same amount of depreciation expense each full year, it is being depreciated under...
the past year. Example of Calculating Days’ Sales in Accounts Receivable The days’ sales in accounts receivable can be calculated as follows: the number of days in the year (use 360 or 365) divided by the accounts...
is calculated by dividing a company’s cost of goods sold during a year by the average inventory during the same year. Accounts receivable turnover ratio. This ratio is computed by dividing the credit sales during a...
, some fixed costs could be eliminated. Here’s an illustration. A company manufactures products in its 100,000 square foot plant. The company’s depreciation on the plant is $1,000,000 per year. The capacity of the...
a company’s assets, liabilities, and owner’s or stockholders’ equity. The balances in these accounts as of the final moment of an accounting year will be reported on the company’s end-of-year balance sheet....
How do you calculate staff turnover? To calculate staff turnover, I would use the W-2 wage statements for the most recent year. My first step would be to sort the W-2’s into meaningful groups such as full-time...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
What is the days' sales in inventory ratio? Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to sell its inventory during a...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
12% per year for four years. If the interest will be compounded quarterly, the number of periods (n) will be __________ 16 (4 years X 4 quarters per year) and i will be 3%. 7. An unrestricted deposit of $1,000 grows to...
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...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
receivable is critical for a company to pay its obligations when they are due. The calculation of the accounts receivable turnover ratio is: credit sales for a year divided by the company’s average amount of accounts...
What is trend analysis? Definition of Trend Analysis In the analysis of financial information, trend analysis is the presentation of amounts from several years all expressed as a percentage of a base year. Trend analysis...
future cash inflows of $100,000 at the end of each year for 10 years. The future cash receipts of $100,000 at the end of each year for 10 years needs to be discounted to their present value. If the future cash amounts...
of the accounting year. The controller’s reserve or controller’s cushion is related to a concept known as budgetary slack. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
as follows: net annual sales divided by the average amount of working capital during the same year. Example of Working Capital Turnover Ratio To illustrate the working capital turnover ratio, let’s assume that a...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
during the period of the net income. Example of Return on Stockholders’ Equity Assume that a corporation without preferred stock had net income after tax of $100,000 for its most recent year. The corporation’s...
. The amounts from past financial statements will be restated to be a percentage of the amounts from a base year. Examples of Horizontal Analysis To illustrate horizontal analysis, let’s assume that a base year is five...
for use as the site for the new office building, the entire $160,000 should be recorded in the Land account. 2. On July 1 of the current year, Jelco began using new equipment in its warehouse. The equipment had a cost...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
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