A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
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...
.) Decrease Wrong. No Effect Wrong. 3. The owner withdraws cash from the business for personal use. Assets Increase Wrong. Decrease Right! The company's asset account Cash will decrease. No Effect Wrong. Liabilities...
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 Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
equipment. The cash savings from the new equipment is expected to be $100,000 per year for 10 years. The payback period is expected to be 4 years ($400,000 divided by $100,000 per year). A second project requires a cash...
are recorded in a contra revenue account such as Sales Discounts. Hence, its debit balance will be one of the deductions from sales (gross sales) in order to report the amount of net sales. Example of Sales Discounts To...
in an investment having a net present value of zero. The internal rate of return is one of the tools in capital budgeting that considers both of the following: The time value of money All of the cash payments and cash...
What is the difference between dividends and interest expense? Definition of Dividends Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and...
's or stockholders' equity will be too high Note: There was no change in AVCO’s cash as of December 31. 5. JOYCO (who uses the periodic inventory method) receives a vendor’s invoice with credit terms of...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Accounts receivable result from __________ sales as opposed to cash...
turnover, the numerator is net __________. 9. To compute the earnings per share (EPS), you must deduct the cumulative preferred stock’s __________ requirement from the corporation’s net income. 10. Earnings per...
What is NPV? Definition of NPV NPV is the acronym for net present value, which can be calculated as follows: The present value of the future cash inflows Minus the cash investment Example of NPV Assume that a company...
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
What is the difference between periodic and perpetual inventory systems? Periodic Inventory System In a periodic system the account Inventory: Has only the ending balance from the previous accounting year Excludes the...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
The first-in, first-out cost flow assumumption under the perpetual inventory system. The first (oldest) costs are the first costs removed from inventory at the time that goods are sold. The most recent costs will remain...
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...
of $28,000 to Accounts Payable. At the payment date within 10 days: debit of $28,000 to Accounts Payable, credit of $27,720 to Cash, credit of $280 to Purchases Discounts (a contra account to Purchases) Net method....
costs and fixed expenses ($18,000 + $12,000 + $1,000). Once the $31,000 has been covered, 70% of the revenues will flow to the company’s net income. Join PRO to Track Progress Mark the Question as Read Must-Watch...
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 as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
What is a LIFO Reserve? Definition of LIFO Reserve The LIFO reserve is a contra inventory account that indicates the difference between the following: Inventory cost reported on the balance sheet under the LIFO cost flow...
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...
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...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
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...
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
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 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.
. A corporation cannot record a gain or loss on its income statement for transactions involving its own __________. 17. The preferred __________ requirement must be deducted from a corporation’s net income when...
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...
been increasing at a faster pace than the company’s net sales. From the balance sheet’s horizontal analysis you may see that inventory and accounts payable have been growing as a percentage of total assets. Vertical...
: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash. (Therefore, a credit...
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...
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
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...
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