and reduces a company’s net income. However, the interest paid also causes a change in the company’s balance sheet and statement of cash flows. Reporting Interest Paid on the Statement of Cash Flows In the statement...
and reduces a company’s net income. However, the interest paid also causes a change in the company’s balance sheet and statement of cash flows. Reporting Interest Paid on the Statement of Cash Flows In the statement...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
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...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
This type of entry has more than one account that is debited and/or more than one account that is credited. An example is a debit to Cash for $530, a credit to Sales for $500, and a credit to Sales Taxes Payable...
such as gasoline. The delivery surcharges should not be reported as nonoperating revenues or other income. Nonoperating revenues or other income items would be outside the main activities of the retailer and...
’ credit sales in accounts receivable; 2) inventory turnover, and the related ratio days’ cost of sales in inventory; 3) total asset turnover; and 4) fixed asset turnover. The accounts receivable turnover ratio and...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
of the states based upon certain accepted factors. In the past, the apportionment or allocation was often based on a corporation’s tangible property, employees, and sales in each of the states. More recently,...
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...
in which the expenses occur. Hence, SG&A expenses are said to be period costs as opposed to being part of a product’s cost. Since SG&A expenses are not a product cost, they are not assigned to the cost of...
be broken down to be: [Sales divided by Assets Employed] times [Operating Income before taxes and interest divided by Sales] = Operating Income divided by Assets Employed = ROCE. Take our Financial Ratios Exam. Join...
and Accumulated Depreciation) Expense accounts (other than a contra expense account) Contra revenue accounts (such as Sales Discounts, Sales Returns and Allowances) Owner’s Drawing account Treasury Stock account Join...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
in the total amount of a corporation’s stockholders’ equity: Positive net earnings or net income reported on the corporation’s income statement. Some positive Other Comprehensive Income items occurred but they are...
capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
by reading our Accounting Equation (Explanation). 1. The basic accounting equation is Assets = Liabilities + __________ Owner's Equity or Stockholders' Equity (if a corporation). Net assets (if a nonprofit...
. Select... increase decrease 7. The account Sales Discounts is likely to have a __________ balance. Select... debit credit 8. If a bank credits a company’s checking account for interest that the company has earned,...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
that consider the time value of money. They are: Net present value Internal rate of return Both of these models are also referred to as discounted cash flow (DCF) models. Discounting Future Cash Flows To recognize the...
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...
in a general journal entry. Select... debited credited 13. Recording an entry in the general journal is referred to as posting. Select... True False 14. A __________ is known as the book of original entry. 15. Entries...
of the combination of NEP and MGC. The consolidated income statement of NEP will report all of the revenues that the group of companies earned from outside customers. (Since the sales of electricity from NEP to MGC and...
The benefit foregone by choosing another course of action. Also known as the opportunity cost. The lost opportunity is sometimes measured by the lost contribution margin (sales minus the related variable costs).
This is an operating expense resulting from making sales on credit and not collecting the customers’ entire accounts receivable balances.
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
An account in the general ledger, such as Cash, Accounts Payable, Sales, Advertising Expense, etc. To learn more, see Explanation of Chart of Accounts.
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
The name used by a buyer of goods or services for the sales invoice or bill received from the supplier of the goods or services.
The sales invoice or bill issued by a vendor and received by the buyer. The customer will also refer to the supplier invoice as the vendor invoice.
A bill issued by a seller of merchandise or by the provider of services. The seller refers to the invoice as a sales invoice and the buyer refers to the same invoice as a vendor invoice.
Journals other than the general journal. Special or specialized journals include the cash receipts journal, the cash disbursements journal, the purchases journal, and the sales journal.
Expenses which do not change in response to reasonable changes in sales or other activity.
An invoice or other document received from a vendor, supplier, etc. usually for goods or services received. Also a verb to indicate that a customer’s sales invoice should be prepared for goods or services.
The journal entry recorded in the general journal (as opposed to the sales journal, cash journal, etc.).
Same as the Days Sales in Accounts Receivable
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
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