In accounting this term means a company’s net income, which is the bottom line of the income statement.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
A corporation’s reported net income and earnings per share for a three-month period.
An income statement that has more than one subtraction in arriving at net income. An income statement showing gross profit is an indication it is a multiple-step income statement.
This financial statistic is the net income of a corporation after income tax (less any preferred dividends) divided by the weighted average number of shares of common stock outstanding during the same period of time.
A term that is sometimes used interchangeably with gross profit. Others use the term to mean the percentage of gross profit dollars divided by net sales dollars.
This loss is not an extraordinary item, since it is not unusual in nature. However, it can appear as a separate line item in the main portion of the income statement. It will be reported at its gross amount (not net of...
A net debit balance for the total amount of owner’s equity. It is the result of the reported amount of liabilities exceeding the reported amount of assets.
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...
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
Net sales revenues minus the cost of goods sold.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
The rate that will discount all cash flows to a net present value of zero.
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
A company’s income statement which reports each item as a percentage of net sales.
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
An action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
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.
Dollars of gross profit divided by the dollars of net sales. Also known as gross margin.
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
The result of the sale of an asset for less than its carrying amount; the write-down of assets; the net result of expenses exceeding revenues.
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...
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...
__________ __________ __________ time. Select... an interval of a moment in 9. The accounts receivable turnover ratio is best calculated using net __________ sales. Select... cash credit cash and credit 10. The payment...
receivable turnover ratio is __________. (Round to the nearest whole number.) 11. If a company offers credit terms of net 30 days, it is likely that its receivables turnover ratio will be no greater than __________....
This financial statement reports a corporation’s revenues, expenses, gains, losses, and the resulting net income. This is sometimes referred to as the P&L. income statement (or) statement of operations (or)...
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...
on a vendor’s invoice before it is paid. 15. A vendor’s invoice of $800 has credit terms of 2/10, net 30. The amount to be remitted if the invoice is paid within 10 days is $__________. 16. If the terms of a...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
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...
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...
. In an accounting year when the number of units produced is the same as the number of units sold, the net income under absorption costing will be __________ __________ the net income under variable costing. Select......
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