The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise. This of course will reduce the...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
a corporation’s net income and the remainder is described as the Income Available for Common Stock. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not...
This term is used in several ways. Some use the word interchangeably with revenues. Others use the word to signify a net amount, such as income from operations (revenues minus expenses in the company’s main...
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...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
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...
... debit credit 5. A debit will __________ the balance in Accounts Payable. Select... increase decrease 6. The balance that you would expect in the account Accumulated Depreciation is a __________ balance. Select......
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...
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...
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
. 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,...
, the difference between the amounts of assets and liabilities is reported as net assets (instead of owner’s or stockholders’ equity). The net assets are presented as: without donor restrictions or with donor...
on credit and offers an early payment discount expressed as 1/10, net 30. This means that a customer is allowed to deduct 1% of the invoice amount, if payment is made within 10 days (instead of paying the full...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
, 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...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
as the result of earning revenues. EXPENSES SXENEESP Unscramble EXPENSES NPSEESEX Unscramble 7. Other ___________________ income includes foreign currency translation adjustments. COMPREHENSIVE PHVNCREISEOEM Unscramble...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during 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...
Short-term marketable securities Accounts receivable (net of the allowance for uncollectible accounts) Notice that inventory (which is a significant current asset for retailers and manufacturers) and prepaid expenses...
What is a single-step income statement? Single-Step Income Statement Definition A single-step income statement arrives at a company’s net income in one step or subtraction: [total revenues and gains] – [total...
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...
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...
flows, the proceeds from the sale of a long-term asset is reported as a positive amount in the investing activities section. Since the gain on the sale is included in the net income, the gain is shown as a deduction...
is reported as a _________ asset. CURRENT RRUCNET Unscramble CURRENT TCENURR Unscramble 2. Inventory is often reported at the _______ of cost or net realizable value. LOWER ORWEL Unscramble LOWER LEORW Unscramble 3....
equity. The amount reported as the cost of goods sold will affect the calculations of gross profit and net income. Since the amount reported as the cost of this year’s ending inventory will carry forward to become the...
of goods sold, SG&A) and losses. Revenues are sometimes referred to as the top line amount on a company’s income statement. Earnings or net income are often referred to as the bottom line amount on the income...
of Purchase Discount Assume that a company receives a supplier’s invoice of $5,000 with the credit terms 2/10 net 30. The company will be allowed to subtract a purchase discount of $100 (2% of $5,000) and remit...
and providers offering a cash discount will refer to it as a sales discount, while the buyer will refer to the same discount as a purchase discount. Examples of a Cash Discount Let’s assume that a company offers a...
What is the earnings per share (EPS) ratio? Definition of Earnings per Share The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s 1) net income (or earnings) after tax that is...
statements. The reason is that it causes the company’s net income in the early years of an asset’s life to be lower than it would be under the straight-line method. One reason for using double-declining-balance...
, our Net Sales and our weekly profit, I immediately made an entry to debit Discount for Shrinkage (a contra account to Sales) and a credit to Provision for Discounts (a contra account to Accounts Receivable). By...
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