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 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...
Why would a company use LIFO instead of FIFO? Definitions of FIFO and LIFO FIFO and LIFO are two of the cost flow assumptions used by U.S. companies with inventory items. FIFO moves the first/oldest costs from...
; L. Webb, Draws; or L. Webb, Withdrawals. The other part of the entry will reduce the specific business asset. Example of Drawings If the owner (L. Webb) draws $5,000 of cash from her business, the accounting entry will...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
and the accounting equation with eight examples. Effect of Owner Investing in a Business For example, if a person starts a sole proprietorship with $15,000 the accounting equation will show: Effect of Business Borrowing...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
divided by the interest expense of $150,000). Since the interest coverage ratio is based on the net income under the accrual method of accounting, we recommend that you also review the corporation’s cash provided by...
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...
. In essence, the cost of goods sold is being matched with the revenues from the goods sold, thereby achieving the matching principle of accounting. When the cost of goods sold is subtracted from net sales, the result is...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
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...
the current asset Cash and to decrease the current asset Accounts Receivable. Note that no revenue is reported when the $850 is received on January 8 and there is no effect on HRS’s net income. Remember there is a...
-Term Bank Loans on the Statement of Cash Flows The cash inflows received through short-term bank loans and the cash outflows used to repay the principal amount of short-term bank loans are reported in the financing...
A financial statement that reported the changes in a company’s working capital. The funds flow statement has been replaced by the statement of cash flows.
IENMCO Unscramble 11. The statement of cash flows reports amounts according to three activities: _____________, financing, and investing. OPERATING ROTAGEINP Unscramble OPERATING NIPAOTERG Unscramble 12. The amount of...
as the result of earning revenues. EXPENSES SXENEESP Unscramble EXPENSES NPSEESEX Unscramble 7. Other ___________________ income includes foreign currency translation adjustments. COMPREHENSIVE PHVNCREISEOEM Unscramble...
the costs of products are likely to change during an accounting year (seems there is always some inflation), a company must select a cost flow assumption that will be used consistently. Examples of cost flow assumptions...
What is LIFO? Definition of LIFO LIFO is the acronym for last-in, first-out, which is a cost flow assumption often used by U.S. corporations in moving costs from inventory to the cost of goods sold. Under LIFO, the most...
What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
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...
the inventory items in place and ready for sale.) The cost may vary somewhat since U.S. companies may choose between the periodic inventory system and the perpetual inventory system. In addition, these companies may...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
and purchase returns and allowances equals __________ __________. 4. The cost of goods sold is the net purchases plus or minus the change in __________ from the beginning to the end of the period. 5. Goods in transit at...
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...
format? Single-step Wrong. There is no subtotal in the single-step income statement. Multiple-step Right! It will appear as the result of subtracting the cost of goods sold from net sales. 8. Which income statement...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
Statement of Cash Flows. See Explanation of Cash Flow Statement.
amount minus the amount allowed for having returned goods and/or allowances that were approved by the seller. When the payment term is “2/10, net 30 days”, it means that the net amount is due in 30 days...
is reported by a retailer in its balance sheet account entitled __________. 17. Checks which have been received from customers but have not been deposited in the bank are reported as part of a company’s cash....
See discounted cash flow model.
of inventory and the cost of the goods sold, a U.S. company is allowed to use a cost flow assumption which is different from the flow of the physical units. Join PRO to Track Progress Mark the Question as Read...
a regular corporation and invest cash in exchange for shares of the new corporation’s common stock, Cash will be debited and the account Common Stock will be credited. (If the common stock has a par value, Paid-in...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
A subgroup of a nonprofit’s supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and...
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...
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
of goods and/or the providing of services Expenses, which include the cost of goods sold, SG&A expenses, and interest expense Gains and losses, such as the sale of a noncurrent asset for an amount that is...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
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