Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
, the $850 of revenues minus the related expenses results in the amount of net income. Effect from Collecting an Account Receivable Assume that on January 8, HRS receives the $850 from the customer whose furnace was...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
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...
, employees, lenders, and others. Monitoring the inventory levels (total amount and individual items) may result in: Reducing the number of units purchased or produced to match lower customer demand Reducing the number...
Delivery expense Rent expense Salaries expense Advertising expense Definition of Loss A loss could have several meanings. The following examples illustrate how the term is used. Examples of Losses Some examples of...
continuous financial statement.) The amount of net income will cause an increase in the stockholders’ equity account Retained Earnings, while a loss will cause a decrease. The amount of other comprehensive income will...
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...
of the general ledger income statement accounts that had debit balances Next, if the Income Summary has a credit balance, the amount is the company’s net income. The Income Summary will be closed with a debit for that...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
credit terms will be indicated on the sales invoice. For example, the seller may have terms of “Net 30 days” or “Due upon receipt.” The term Net means net sales which is the amount of the sales invoice minus any...
Receivable and the $18,000 credit balance in Allowance for Doubtful Accounts is known as which of the following? Select... Accounts receivable, net Net realizable value of accounts receivable Both of the above answers...
. Instead, the cost of goods sold is computed as follows: cost of beginning inventory + cost of goods purchased (net of any returns or allowances) + freight-in – cost of ending inventory. This account balance or this...
net realizable value at the split-off point and then to __________ __________ __________ __________ the common costs that will be allocated to the joint products. Select... add that amount to deduct that amount from 16....
the reported amount of net income. SCF Adjustment for an Increase in Accounts Payable To illustrate, assume that the income statement reports $20,000 of revenues, $15,000 of expenses, and the resulting net income of...
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...
, a $20,000 amount will likely be immaterial for a large corporation with a net income of $900,000. However, the same $20,000 amount will be material for a small corporation with a net income of $40,000. Another view of...
in the business minus the owner’s draws or withdrawals from the business plus the net income (or minus the net loss) since the business began. Owner’s equity is viewed as a residual claim on the business assets...
Financial Statements Video Training Part 10 Income statement: formats (multiple-step, single-step, comparative, amounts as % of net sales) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
is a debit balance. In other words, the corporation has a negative amount of retained earnings. Example of Deficit Within Stockholders’ Equity Assume a corporation was formed just over three years ago. In its first...
management of their magnitude. Therefore, gross sales can also be defined as the company’s sales revenues before deducting the sales returns, sales allowances, and sales discounts. (The amount remaining after these...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
shipping point This term indicates that ownership of goods will transfer to the buyer when the goods leave the seller’s warehouse. Mark as wrong Mark as right 2/10, net 30 This invoice term indicates that the net...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
What are the effects of overstating inventory? Definition of Overstating Inventory Overstating inventory means that the reported amount for the cost of a company’s inventory is greater than the actual true cost based...
an annualized interest rate of 18% (1.5% per month multiplied times 12 months). A vendor’s invoice having an early payment discount of “1/10, net 30” means that 1% can be saved if the amount owed is remitted...
method, the interest expense will be included in the company’s net income or net earnings. The interest expense is adjusted to a cash amount through the changes to the working capital amounts, which are also reported...
. The accounting rule requires inventory to be reported at the lower of its cost or its net realizable value (NRV). The amount of the inventory write-down is reported on the current income statement. To illustrate,...
closer to the time of the sale or service, and The balance sheet will report a more realistic net amount of accounts receivable that will actually be turning to cash The allowance method can be applied in one or both of...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
The amount an employee “clears” on her or his payroll check. It is also the “net” amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for...
Adding the increase in accrued expenses payable Example of the Direct Method of SCF When the direct method of presenting a corporation’s cash flows from operating activities is used, the amount of net income is not...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
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