the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
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...
of Purchase Discount Assume that a company receives a supplier’s invoice of $5,000 with the credit terms 2/10 net 30. The company will be allowed to subtract a purchase discount of $100 (2% of $5,000) and remit...
, the difference between the amounts of assets and liabilities is reported as net assets (instead of owner’s or stockholders’ equity). The net assets are presented as: without donor restrictions or with donor...
statements. The reason is that it causes the company’s net income in the early years of an asset’s life to be lower than it would be under the straight-line method. One reason for using double-declining-balance...
of the statement of cash flows usually begins with a company’s net income and then immediately adds the period’s depreciation expense. In effect the noncash depreciation expense is added back because the...
Purchase Allowances or to the account Purchase Returns and Allowances, and 2) a debit of $15 to Accounts Payable. The retailer will combine the debit balance in its Purchases account with the credit balance in Purchase...
What is the earnings per share (EPS) ratio? Definition of Earnings per Share The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s 1) net income (or earnings) after tax that is...
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 Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
in net income. Since the internet business was not purchased from another company and its cost to develop was not significant, the company’s balance sheet will report only the business’s cash, receivables and some...
and its credit terms are 2/10, net 30. If the invoice is paid on July 16, the amount that should be received by the seller is $__________. 5. A company deposited one of its customer’s checks that it received as...
income, and net income for both periods will also be incorrect. Example of an Inventory Error Assume that a company began operations on December 1. During December the company purchased $100,000 of goods that it planned...
to the amount invested. The computed number of years is referred to as the payback period. To illustrate, assume that a company invests $100,000 today in a project that is expected to generate cash of $50,000 for two...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The total amount of hourly wages before the withholdings for taxes and other deductions is...
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....
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
. If a manufacturer sells merchandise to a retailer with terms of net 30 days, the manufacturer is the creditor and retailer is the debtor. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
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...
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 Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
Bookkeeping Video Training Part 1 Accounts: record each transaction in two accounts, debits = credits, T-accounts, amounts reported on financial statements Must-Watch Video Learn How to Advance Your Accounting and...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
of $5,000 and cost of goods sold of $3,000. The difference of $2,000 is part of the retailer’s gross profit, operating income, and net income. The word “gain” is not appropriate since the activities involved the...
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...
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...
in order to replace the units sold. The use of historical costs during periods of increasing prices means that companies with large amounts of plant assets and inventory will be reporting net income that is greater than...
of the U.S. Department of Labor, is the employer required to pay the employee an additional amount for working six overtime hours? Select... Yes No View Coaching One of the criteria in the federal rule for overtime is a...
an __________. 6. The cumulative amount of a corporation’s other comprehensive income can be found in the __________ __________ section of the balance sheet. 7. The __________ basis or method of accounting does a...
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.
by reading our Accounting Principles (Explanation). 1. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Cost Wrong. The cost...
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...
Featured Review
"I am currently the controller for a wall-and-ceiling subcontractor. I have been in this position for almost 5 years now. I have no accounting background, as I was a professional hairstylist before I came to this company. With hard work, and with the AccountingCoach Online Course, I have become quite an amazing financial accountant! The previous controller for our company had set me up with PRO for weekly training. AccountingCoach is the best accounting website I've seen. I have referred multiple friends and family members to AccountingCoach for training, either for a new position at work, a refresher, or for someone wanting to change their career to accounting. The material on this website is on point. It is everything you would learn in a community college accounting degree, and it has benefited me in so many ways. It taught me the basics of accounting, plus so much more. It also helped me understand financial accounting, and cash-flow reporting, which is huge in the position I am now in." - Tamara K.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: