The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
the net amount owed within 10 days (20 days sooner than the 30 days), the customer may subtract 2% from the net amount owed. This discount of 2% is known as an early payment discount or as a sales discount. Example of...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
The combined amount of the debit balance in the current asset account Accounts Receivable and the credit balance in the contra asset account Allowance for Doubtful Accounts. The difference between the balances in these...
The bottom line of the income statement when revenues and gains are less than the aggregate amount of cost of goods sold, operating expenses, losses, and income taxes (if the company is a regular corporation).
See working capital.
Gross wages or gross salaries minus withholdings for payroll taxes and other items such as insurance, union dues, United Way, etc. Also referred to as “take home pay” or the amount the employee...
Current assets minus current liabilities. Also see working capital.
What are net assets? Definition of Net Assets Net assets is defined as total assets minus total liabilities. Examples of Net Assets In a sole proprietorship the amount of net assets is reported as owner’s equity. In a...
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
What is the net method? Definition of Net Method In accounting, the net method likely refers to the way a company records each vendor’s invoice that offers an early payment discount. Example of Net Method Assume that a...
The result of subtracting total liabilities from total assets. It is also the term used by not-for-profit organizations instead of owner’s equity or stockholders’ equity. To learn more see our Explanation of...
The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
A lease where the lessee/tenant pays not only rent, but also the property taxes, insurance, and maintenance.
The “bottom line” on the statement of activities. The change in net assets results from revenues, expenses, and the release of assets from restrictions. It is computed for an organization’s three...
This current liability account reports the ”net” amount a company owes its employees as of the date of the balance sheet. The ”net” amount is the amount of the employees’...
Prior to 2018, this term was used by a not-for-profit organization to describe net assets without donor-imposed restrictions. Since 2018, this term has been replaced with the classification net assets without donor...
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
The gross amount of purchases minus the amount of purchase returns, purchase allowances, and purchase discounts.
The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.
A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
Is sales tax an expense or a liability? Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional city and/or county tax) that is paid by the buyer at the time of purchase. The...
of the Cash account. Examples of Net Cash Flows The net cash flows include the cash inflows such as the money received from customers who purchased products on credit in an earlier accounting period, cash sales...
income is significant. Here are some hypothetical amounts to illustrate the point: Revenue from sales of products $300,000 Cost of the products that were sold $200,000 Expenses (wages, rent, ads, etc.) $88,000 Net...
' equity appear on the right side of the accounting equation. To increase the balance on the right side, a credit is needed.) TIP #1: Typically revenue accounts are credited. TIP #2: If a cash sale occurs, the asset...
of the sale, service, or date of the sales invoice. Example of 2/10 Assume that a company is in an industry with credit terms of net 30 days. This means the amount owed by the customer is due within 30 days of the...
What is net present value? Definition of Net Present Value Net present value is the combination of 1) the present value of cash inflows, and 2) the present value of the cash outflows. To arrive at these present value...
Also known as income from operations, which excludes discontinued operations, extraordinary items, and nonoperating items such as interest expense, investment income, gains, and losses.
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
The amounts reported on the income statement. Because of accrual accounting the net income flows will be different from the cash flow.
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
This classification of net assets has been replaced by the FASB with the classification net asset with donor restrictions.
This classification of net assets has been replaced by the FASB with the classification net assets with donor restrictions.
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
Beginning in 2018, this is one of two classifications of net assets reported on the financial statements of a not-for-profit organization’s financial statements. This classification is to be used instead of the...
Often this account appears as a line in the retained earnings section of stockholders’ equity (balance sheet) and will show the year-to-date net income. The reason is that some accounting software will not put the...
Featured Review
"I was looking out for an online accounting course after a gap of 25 years. Luckily, I came across AccountingCoach. The very first visit to this site made me feel very comfortable. I felt as though it was made just for me. Very soon I enrolled myself as a PRO member. Now that I am able to access the entire site like the seminars, exams, crosswords and many many more interesting ways to learn accounting, my knowledge in accounting has deepened. I can confidently say to people who are new to this field, or who are trying for a refresher course like me, this is THE WEBSITE for you. It's a well structured program, the most difficult accounting concepts have been explained in a very crystal clear fashion with beautiful real-life examples. Thanks to Mr Harold Averkamp and his dedicated team for sharing their deep insight without whom I wouldn't be ready to give my bookkeeping exams shortly." - Sunita P.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: