the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is also used to describe write-down...
the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is also used to describe write-down...
in exchange for cash or other assets. Donated capital was received. Here is a list of items that could cause a decrease in the total amount of a corporation’s stockholders’ equity: Negative net earnings or a net...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
and the associated adjusting entries will result in a more complete and accurate reporting of a company’s assets, liabilities, equity, and a more accurate reporting of its revenues, expenses, and earnings during each...
a company’s assets, liabilities, and owner’s or stockholders’ equity. The balances in these accounts as of the final moment of an accounting year will be reported on the company’s end-of-year balance sheet....
sheets reveals that its accounts receivable decreased by $10,000 and its accounts payable increased by $7,000 during the same year. To keep our illustration simple, let’s assume that except for cash, the reported...
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
What is meant by owner's draws? Definition of Owner’s Draws Owner’s draws are withdrawals of a sole proprietorship’s cash or other assets made by the owner for the owner’s personal use. The account in which...
for investing in future fixed assets as well as arranging for the financing of the projects. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
in accounts receivable, inventory, accounts payable, and most other current assets and current liabilities. The direct method for reporting the cash from operating activities lists the following: the amounts collected...
of a manufacturer. The amount of Work-in-Process Inventory would be reported along with Raw Materials Inventory and Finished Goods Inventory on the manufacturer’s balance sheet as a current asset. Definition of...
produced. This is a challenging task because there may be no direct relationship. For example, the property taxes and insurance on the manufacturing buildings are based on the assets’ value and not on the number of...
an organization’s assets. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
margin Return on assets Return on stockholders’ equity The inventory turnover ratio will be greater when LIFO is used during periods of increasing costs. The reason is that the cost of goods sold will be higher and...
Does collecting a customer's accounts receivable affect net income? Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports revenues from sales of products or the...
. In addition, your state government will likely have an office to assist in starting a new business. Accounting for Sole Proprietorships In accounting, the balance sheet of the sole proprietorship reflects the...
and credit side, or left and right side, the balance in a general ledger account will be either a debit balance or a credit balance. Within the general ledger, these accounts are expected to have debit balances: assets,...
as dividends to its stockholders. Are Retained Earnings an Asset? The amount of a corporation’s retained earnings is reported as a separate line within the stockholders’ equity section of the balance sheet. However,...
What is a general ledger? Definition of General Ledger A general ledger is a grouping of perhaps hundreds of accounts that are used to sort and store information from a company’s business transactions. The general...
and have debit balances Revenue accounts generally have credit entries and have credit balances Assets generally have both debit and credit entries, but usually have debit balances Liabilities generally have debit and...
How does revenue affect the balance sheet? Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts receivable) and an increase in the...
-in-process, and the finished goods that are owned and on hand. Inventory is generally valued at its cost and it is likely to be the largest component of the company’s current assets. Since the unit cost of inventory...
been set aside to replace certain assets. Examples of Past Use of Reserve Two examples where the term reserve had been used include the following contra asset accounts: Reserve for Doubtful Accounts was renamed to be...
comprehensive income. Some of these items involve currency translation, hedging, and pensions. Balance sheet. This statement of financial position reports a corporation’s assets, liabilities and stockholders’ equity...
statements to the earlier financial statements of the same company Compare a company’s financial statements to those of other companies (especially within the same industry) Understand how a company...
in all of the capital accounts must be equal to the reported total of the company’s assets minus its liabilities. Because of the historical cost principle and other accounting principles, the total amount reported in...
Is it possible to have a balance sheet for a single day? A balance sheet presents the amounts of a company’s assets, liabilities, and owner’s equity as of an instant or moment in time within a day. Usually it is the...
to the financial statements is usually a summary of the company’s significant accounting policies for the use of estimates, revenue recognition, inventories, property and equipment, goodwill and other intangible...
income statement. A few examples include advertising, office salaries, interest on most loans, and research and development costs. When a cost has a future economic benefit which can be measured, the accountant should...
but are not yet recorded in the accounts, and revenues and assets that have been earned but are not yet recorded in the accounts Example of an Accrual of an Expense One example of an accrual of an expense and liability...
What is a valuation account? Definition of Valuation Account In accounting, a valuation account is usually a balance sheet account that is used in combination with another balance sheet account in order to report the...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
are the balance sheet accounts such as the accounts for recording assets, liabilities, and the owner’s (or stockholders’) equity. However, the sole proprietor’s drawing account, which is reported on the balance...
of interest that the issuer will pay each year. It is occasionally referred to as the coupon interest rate. Mark as wrong Mark as right bond sinking fund This restricted noncurrent asset is sometimes required so that...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
This principle of internal control requires that more than one person be involved in certain transactions or procedures so that the opportunity for misappropriating assets is reduced. separation of duties (or)...
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...
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