One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
Liabilities Equity or net assets Investments by owners Distributions to owners Comprehensive income Revenues Expenses Gains Losses The above list is based on the FASB’s Statement of Financial Accounting Concepts No....
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
. If a manufacturer sells merchandise to a retailer with terms of net 30 days, the manufacturer is the creditor and retailer is the debtor. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
is sometimes referred to as a noncash expense. True Right! The entry for depreciation is a debit to Depreciation Expense and a credit to Accumulated Depreciation. Cash is not involved. The depreciation entry reduces net...
part will be affected. 1. Depreciation Expense. Operating Right! Depreciation is added back to net income in the operating activities section because the company's net income was reduced by the depreciation expense...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
in order to replace the units sold. The use of historical costs during periods of increasing prices means that companies with large amounts of plant assets and inventory will be reporting net income that is greater than...
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...
of $5,000 and cost of goods sold of $3,000. The difference of $2,000 is part of the retailer’s gross profit, operating income, and net income. The word “gain” is not appropriate since the activities involved the...
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...
Depreciation is credited with the depreciation expense of the accounting period. Example of Double Declining Balance Depreciation Let’s assume that a retailer purchases fixtures on January 1 at a cost of $100,000....
depreciation, assume that a service business purchases equipment at a cost of $160,000. This asset is expected to have a useful life of 5 years at which time it will be sold for $10,000. This means that the total amount...
. There is no regulation that requires the tax depreciation to be the same as the book depreciation in a given year. (However, over the life of an asset, the total depreciation expense for both will be limited to the...
the accrual method, when a company purchases goods from a supplier on credit the company will credit Accounts _____________. PAYABLE AAPBELY Unscramble PAYABLE APLYAEB Unscramble 19. This is an allocation process (not a...
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...
of net 30 days. Its sales, accounts receivable and inventory had uniform increases each month of the year. The cost of goods sold was a constant 70% of sales. The balance in accounts receivable was $40,000 at the start...
about this topic by reading our Accounts Receivable and Bad Debts Expense (Explanation). 1. When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ discount period. 2....
’ interim financial statements will include four 13-week periods instead of four 3-month quarters. Income Statement The income statement reports a corporation’s revenues, expenses, gains, losses, and the resulting...
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.
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
+ Revenues – Expenses – Dividends – Treasury Stock. The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2)...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
, and net income are uncertain. This risk has resulted in the decline of defined benefit pension plans and has increased the popularity of defined contribution pension plans. Join PRO to Track Progress Mark the Question...
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...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
on the preferred stock will appear on the corporation’s income statement as a subtraction from the corporation’s net income. This is necessary to report the earnings available for common stock. When the earnings...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
. Depreciation, depletion and amortization are also described as noncash expenses, since there is no cash outlay in the years that the expense is reported on the income statement. As a result, these expenses are added...
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