. If the __________ __________ __________ of a company’s inventory is less than its cost, this lower amount will be reported on the company’s balance sheet. 3. If an error results in the amount of ending inventory...
. If the __________ __________ __________ of a company’s inventory is less than its cost, this lower amount will be reported on the company’s balance sheet. 3. If an error results in the amount of ending inventory...
are as of a _________ in time. POINT ONTIP Unscramble POINT INOTP Unscramble 2. Resources. ASSETS SEASTS Unscramble ASSETS ASETSS Unscramble 3. Obligations. LIABILITIES IIABLIILTES Unscramble LIABILITIES LAIISBIIELT...
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...
), in units, hours of services provided, etc. The basic calculation of the break-even point in sales dollars for a year is: fixed expenses (fixed manufacturing, fixed SG&A, fixed interest) for the year divided by the...
season is finished, the merchandise returns from holiday sales are completed, and the January clearance sales have taken place. [The 52-53 week periods with 13-week quarters allows for better comparisons than calendar...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
(not sales) in calculating the inventory turnover ratio because the company’s inventory is recorded and reported at its cost (not at its selling prices). However, be cautioned that some people will use sales and...
Reducing the Need for Accruing Expenses One day I was explaining to the owner of a small business that I would have to accrue for the shipping expenses associated with his company’s sales. Since the shipping company...
Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
to provide the goods or services to the customer or to return the money. Hence, the current liability account Customer Deposits is credited. When the company earns the deposit amount, the current liability will be...
from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
the future benefit of the cost Examples of Expense Some of the expenses that will be reported on a retailer’s income statement for the month of August include: Cost of goods sold for the August sales. (The date that...
, there will be an occasional 53-week year) School districts typically have fiscal years of July 1 through June 30 to coincide with its natural business year. Large retailers often end their fiscal years on the Saturday...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
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 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...
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.
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 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.
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
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.
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.
The rate that will discount all cash flows to a net present value of zero.
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 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...
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.
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 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.
A corporation’s reported net income and earnings per share for a three-month period.
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...
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.
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.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
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...
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...
. A manufacturer’s inventory consists of the cost to produce the items (the costs of direct materials, direct labor, and manufacturing overhead). Sometimes a company’s inventory cost has to be reduced to a lower...
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