. If the __________ __________ __________ of a company’s inventory is less than its cost, this lower amount will be reported on the company’s balance sheet. 3. If an error results in the amount of ending inventory...
. If the __________ __________ __________ of a company’s inventory is less than its cost, this lower amount will be reported on the company’s balance sheet. 3. If an error results in the amount of ending inventory...
What is the difference between FIFO and LIFO? Difference Between FIFO and LIFO The difference between FIFO and LIFO will exist only if the unit costs of a company’s products are increasing or decreasing. U.S. companies...
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
and divides their total by the total amount of current liabilities. Definition of Acid Test Ratio The acid test ratio uses only the following current assets (which are considered to be the “quick assets”) and...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
What are gross sales? Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the total will be adjusted to the...
the corporation first issued the shares of stock. Mark as wrong Mark as right retained earnings This section of stockholders’ equity (and this general ledger account) generally reports the corporation’s cumulative...
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...
Does a dividend reduce profit? Definition of Dividend A dividend declared by a corporation is a distribution to its stockholders of the profits the corporation had earned. Since the dividends are not an expense, 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...
that are recorded in income statement accounts. This allows the balance sheet account Owner’s Capital (or Retained Earnings) to avoid having all of the thousands or millions of revenue and expense transactions from...
Capital The adequacy of a company’s working capital depends on the industry in which it competes, its relationship with its customers and suppliers, and other factors such as the following: The types of current assets...
in the accounting periods in which the asset is being used. More Information on the Depreciation Entry It is important to understand the following: The depreciation entry will cause a decrease in the company’s net...
Checks received from customers that are not yet deposited U.S. Treasury note maturing in 8 months View Coaching A cash equivalent will generally have a maturity date of 3 months or less. Hence, the U.S. Treasury note...
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...
, but it is not yet deducted from the company's books. Therefore, a journal entry is required to deduct the bank service charge from the general ledger account Cash and also to debit an account such as Bank Fee...
What is the discounted value of expected net receipts? Let’s first define expected net receipts. These are future receipts after deducting any related payments. For example, if you are likely to receive $1,200 one year...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
as an __________ asset on a company's balance sheet. 18. The word "__________ payable" is often in the title of liability accounts. 19. The statement of cash flows explains the changes in cash and cash...
The rate that will discount all cash flows to a net present value of zero.
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
cash balance (or) credit balance in cash account This type of cash balance usually results from writing checks without sufficient funds available. As a result this amount should be reported as a current liability. Mark...
, an invoice of $1,000 with terms of 1/10, net 30 means that the $1,000 obligation will be settled in full for $990 if it is paid within 10 days. If the customer has adequate cash or a readily available line of...
works as hard, but instead of a salary, draws $80,000 for personal use. The regular corporation pays a $10,000 cash dividend and its income tax rate is 15%. The income statement of the sole proprietorship will report...
Expense and credit a liability account in the accounting period when the sales occur. When the commission payment is made, the liability account is debited and the Cash account is credited. If the sales are related to...
is written by a company, the company’s general ledger account Cash will need a __________ entry. Select... debit credit 12. When money is received from a customer, the amount is entered as a __________ to the Cash...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
financial statements of a U.S. corporation consist of a complete set of the following: income statement (statement of earnings, statement of operations) statement of comprehensive income balance sheet (statement of...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
revenues, etc.) and operating expenses (cost of sales, SG&A expenses) appear first The subtotal Gross profit is the result of subtracting the Cost of sales from the Net sales The subtotal Operating income is the...
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 a percent of the base year amounts are: 100, 122, 149, 184, 229, 277, and 317. From this trend analysis we see that Revenues in 2023 were 379% of the 2017 revenues Net income in 2023 was 423% of the 2017 net income...
. Example 1 If Jay Corporation borrows $10,000 from its bank, Jay Corporation’s asset Cash increases by $10,000 and its liability Loans Payable increases by $10,000. Thus, the accounting equation remains in balance....
Basis to Cash Basis Using the transactions above, the accrual basis of accounting will result in the December income statement reporting revenues of $10,000 and expenses of $1,800 for a net income of $8,200. Using the...
Why is interest expense a nonoperating expense? Definition of Interest Expense as a Nonoperating Expense Interest expense is the cost of borrowing money. For most companies the borrowing of money is not part of their...
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