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...
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...
) appeared on the income statement and reduced the company's net income. However, the company's cash did not decrease. (Actually the company's cash increased by the amount received for the asset.) You need...
during the year, will the $23,000 appear as a positive or negative amount on the statement of cash flows? Positive Wrong. Negative Right! Since accounts receivable increased, the company did not collect all of the sales...
What does understated mean? Definition of Understated In accounting, understated means that a reported amount is less than the actual, true amount based on the accounting rules. In other words, the reported amount can be...
, another company in an industry where the credit terms are net 60 days will need a greater amount of working capital. Having an approved credit line with no borrowing allows a company to operate comfortably with a small...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset’s life but slower in the later years. However, the total amount of depreciation expense during the...
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...
... accrual cash 28. A more accurate measurement of a company’s net income during a short period of time is achieved under the__________ basis or method of accounting. Select... accrual cash 29. If the amount of...
accounting year appear on the statement of cash flows as a positive or negative adjustment to net income? Select... Positive Negative 22. A company had current assets of $120,000 and current liabilities of $100,000...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
What is the expanded accounting equation? Definition of Expanded Accounting Equation The expanded accounting equation provides more details for the owner’s equity amount shown in the basic accounting equation. The...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
as right gross profit (or) gross margin This is defined as net sales minus cost of goods sold. gross profit (or) gross margin This is defined as net sales minus cost of goods sold. Mark as wrong Mark as right operating...
-30 days past due, 31-60 days past due, etc. A receivable that is current (not past due) is usually not a problem. However, when customers are past due it is a sign that they are experiencing some financial difficulties....
of $10,000, for a net amount of $110,500. The income statement for the accounting period will report Bad Debts Expense of $10,000. Aging of Accounts Receivable Form and Template Balance Sheet: Retail/Wholesale –...
of purchases. Mark as wrong Mark as right 2/10, net 30 This early payment discount indicates that the net amount (after any returns or allowances) is due within 30 days. However, 2% can be deducted if it is paid...
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
that are due within one year of the balance sheet date and will require the use of a current asset or will create another current liability. Mark as wrong Mark as right working capital (or) net working capital This is...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
What is accounting? Definition of Accounting Accounting is the recording of financial transactions along with storing, sorting, retrieving, summarizing, and presenting the results in various reports and analyses....
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
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...
to approving a vendor’s invoice for payment, the invoice, receiving report, and __________ order should be compared. 3. A supplier’s invoice for $1,000 is received on June 1 and has terms of 1/10, net 30. If...
on the amount. Mark as wrong Mark as right lower of cost or net realizable value This inventory valuation rule is usually associated with the accounting concept of conservatism. It is relevant when the value of...
in the beginning inventory (the prior year’s ending inventory) + the cost of the current year’s net purchases. Allocating Cost of Goods Available to Inventory and Cost of Goods Sold At the end of the year, the cost...
What is present value? Definition of Present Value In accounting, present value refers to the amount after discounting future cash amounts to the present. The present is depicted on a timeline as the point 0, which is...
outflows for each option. Since these cash flows will occur at different times, you must “discount” the future cash flows to a present value. (This is necessary in order to recognize the time value of money.) The...
of significant noncash changes in the above sections Definition of Free Cash Flow Free cash flow is a metric often used by financial analysts. It is calculated by using two amounts reported on a company’s statement of...
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...
that a sales invoice is for $1,000 and the buyer has been authorized to return $100 of goods. Therefore, the net amount due to the seller within 30 days is $900. However, the buyer may deduct $9 (1% of $900) if the...
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