What is purchase discounts lost? Definition of Purchase Discounts Lost The account Purchase Discounts Lost is a general ledger account used by a company that records vendors’ invoices using the net method. A debit...
What is purchase discounts lost? Definition of Purchase Discounts Lost The account Purchase Discounts Lost is a general ledger account used by a company that records vendors’ invoices using the net method. A debit...
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...
withholdings, the routine payroll entry will record the amount withheld as a credit to Advance to Employees. This in turn results in a smaller amount being credited to Net Payroll Payable. Example of Advance to an...
Assume that a corporation had the following amounts for the most recent year: Net income after tax of $500,000 Interest expense of $200,000 Income tax expense of $300,000 Given these assumptions, the corporation’s...
, 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...
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...
, 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...
Return Let’s assume that a company using the periodic inventory system, purchased merchandise having a cost of $1,000 with terms of net 30 days. This was recorded with: A debit to Purchases for $1,000 A credit to...
Depreciation is $55,000. By crediting the account Accumulated Depreciation instead of crediting the Equipment account, the balance sheet at the end of the year can easily report both the equipment’s cost of $70,000...
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...
of the statement of cash flows usually begins with a company’s net income and then immediately adds the period’s depreciation expense. In effect the noncash depreciation expense is added back because the...
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...
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....
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...
method, the interest expense will be included in the company’s net income or net earnings. The interest expense is adjusted to a cash amount through the changes to the working capital amounts, which are also reported...
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...
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...
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...
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...
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...
as the result of earning revenues. EXPENSES SXENEESP Unscramble EXPENSES NPSEESEX Unscramble 7. Other ___________________ income includes foreign currency translation adjustments. COMPREHENSIVE PHVNCREISEOEM Unscramble...
, as well as its gross profit, net income, income tax payments, and more.) FIFO. This results in the oldest, lower costs as the first to flow out of inventory and becoming the cost of goods sold LIFO. This results in the...
and expenses and the resulting net income. Statement Of Cash Flows Wrong. This financial statement explains how a company's cash balance changed during the accounting period. 3. Under the accrual basis of...
the employees’ pay, 2) payroll taxes that are paid solely by the employer, and 3) the payroll taxes that are withheld from the employees’ gross pay and also paid by the employer Payments to employees for their net...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
benefits (more sales, lower health insurance expense) are related to the amounts being spent. Here, too, the ROI calculations do not consider the time value of money. Join PRO to Track Progress Mark the Question as Read...
Are estimates allowed in bookkeeping? While bookkeeping involves mostly precise amounts from sales and purchase invoices, cash receipts and checks written, etc. there are situations when estimates need to be entered....
What is the difference between a bookkeeper and an accounting clerk? I envision a bookkeeper as a person employed by a smaller company and being responsible for recording nearly all of its transactions. Hence, the...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
is good or bad, sufficient or insufficient, etc. depends on many factors including the composition of the company’s current assets, the speed at which the company’s sales turn into cash, the credit terms of its...
of carriage outwards should be reported on the income statement as an operating expense in the same period as the revenue from the sale of the goods. (Carriage outwards is not part of the cost of goods sold.) Example of...
, if the manufacturer’s production and sales have declined and it fails to cut fixed costs, the manufacturer could be worse off by increasing selling prices. It could even lead to a death spiral. Examples of Elastic...
amount due for the sales invoice and might even show a negative amount due from the customer. If your company mails statements to its customers, the customer should be able to see its double payment when reviewing the...
At what point are revenues considered to be earned? Revenues, which are derived from an entity’s main activities such as the sale of merchandise or the performance of service, are considered to be earned when the...
. After the ad is shown in the Super Bowl Game, the corporation must credit Prepaid Advertising and debit Advertising Expense. This is necessary because the accountants cannot measure the sales (if any) that will occur...
How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
thousand. For example, an annual salary of $60,000 might appear as $60k instead of $60M. Definition of MM The Roman numerals MM are used to indicate one million. Example of MM Sales of $3,000,000 might be written as...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
(probable and the amount can be estimated). Product warranties will be recorded at the time of the products’ sales by debiting Warranty Expense and crediting to Warranty Liability for the estimated amount. Join PRO to...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
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