to determine the approximate amount of inventory that has been lost due to theft, fire, or other reasons. The gross profit method of estimating ending inventory assumes that the gross profit percentage or the gross...
to determine the approximate amount of inventory that has been lost due to theft, fire, or other reasons. The gross profit method of estimating ending inventory assumes that the gross profit percentage or the gross...
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...
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 fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
What is the self-employed person's FICA tax rate for 2022 and 2023? 2022 FICA Tax Rate for Self-Employed The self-employed person’s FICA tax rate for 2022 (January 1 through December 31, 2022) is 15.3% on the...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement...
to manually posting them to the accounts in the general ledger or subsidiary ledger. Examples of Journals in a Manual Accounting System Manual systems usually had a variety of journals such as a sales journal, purchases...
What is the meaning of sundry and sundry debtors? Definition of Sundry Sundry can mean various, miscellaneous, or diverse. Definition of Sundry Debtors Sundry debtors could be referring to a company’s customers who...
. The land used in a business will be reported on the company’s balance sheet under the asset heading of property, plant and equipment. Example of Land Assume that a company purchases a warehouse for its business...
and it purchases goods with terms FOB shipping point. As a result the company is responsible for paying the cost of the carriage inwards. The company will record the amount in the general ledger account Carriage Inwards...
of the accounting period by means of adjusting entries. The amounts for some accrued liabilities and their related expenses (or losses) may have to be estimated. Examples of Accrued Liabilities Some examples of accrued...
pays for its purchases 90 days after it receives the goods. The corporation does not have sufficient money to purchase the raw materials, pay for the labor, and then wait 90 days to collect the receivable. The...
and that the physical goods may flow differently. With continuous inflation, LIFO (compared to FIFO) will result in lower gross profits, lower net income, and lower taxable income. Hence, since 1960 many profitable U.S....
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
How do the income statements of a sole proprietorship and a regular corporation differ? Definition of Income Statements of Sole Proprietorship and Regular Corporation The income statement of a sole proprietorship and a...
the budgeted expenses The amount by which actual net income was less than the budgeted net income The amount by which current revenues were less than the previous year’s revenues The amount by which actual expenses...
What is the difference between Present Value (PV) and Net Present Value (NPV)? Definition of Present Value (PV) Present value or PV is the result of discounting one or more future amounts to the present. The greater the...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
A company’s total contribution margin in dollars is the total net sales minus the total amount of variable expenses. Dividing the contribution margin in dollars by the total amount of net sales is the contribution...
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
, when the invoice is to be paid, a detailed listing of the goods and/or services, the amount owed for each item, and the total amount of the invoice. Some common invoice payment terms are: Due upon receipt Net 30...
How do I calculate IRR and NPV? Definition of IRR The internal rate of return (IRR) method or model determines the interest rate that discounts all cash inflows and cash outflows to a net present value of $0. In other...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within 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...
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 Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
of presenting the statement of cash flows, the cash from operating activities begins with the company’s net income and is then adjusted for depreciation expense and the changes in the current assets and current...
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
requires two pounds of plastic pellets. The company's practice is to have on hand at the end of each month 60% of the pounds of plastic pellets required for the following month's production. The purchases of...
accounts is a __________ balance. Select... debit credit 11. At the instant when a corporation purchases new equipment for cash, the amount of stockholders’ equity will __________. Select... decrease increase remain...
ratio. days' sales in inventory This is the result of dividing 365 or 360 days by the inventory turnover ratio. Mark as wrong Mark as right working capital (or) net working capital This is calculated by subtracting...
items. The not-for-profit organization’s equity section has the heading Net Assets. The reason for the use of Net Assets is the NFP does not have owners. Within the net assets section are the amount of net assets...
, and depreciation expense of $8,000. Therefore, the net income reported on its income statement was $22,000. (The depreciation pertains to a truck purchased in an earlier year.) Depreciation and the Statement of Cash...
that the balance sheet reports the net amount that is expected to be collected. The credit balance in the Allowance account is associated with the income statement account Bad Debts Expense. In other words, when a...
Net income divided by net sales.
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
What is gross profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Gross profit is sometimes referred to as gross margin. (However, gross margin can also mean the gross...
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