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...
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...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
Financial Accounting For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
What is the difference between Social Security and Medicare payroll taxes? Social Security Payroll Tax The Social Security payroll tax is 6.2% and is based on each employee’s earnings (wages, salaries, bonuses,...
Payroll Accounting(Quick Test #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Cash Flow Statement(Quick Test #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Stockholders' Equity Stockholders’ Equity A business corporation’s owners are referred to as stockholders or shareholders because they hold stock certificates which provide evidence of their share of ownership in the...
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 Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Balance Sheet(Quick Test #2 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
Accounting Equation Basic Accounting Equation In accounting (and bookkeeping) the basic accounting equation is: Thanks to double-entry accounting (or double-entry bookkeeping) the basic accounting equation will/ must...
Stockholders' Equity(Quick Test #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of...
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
Under the accrual method of accounting, the account Unemployment Tax Expense on Warehouse reports the unemployment tax expense the company has incurred for the employees in the warehouse during the period indicated in...
The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company’s bonds payable. Bond interest expense also includes the amortization of the...
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
A long-term asset which indicates the cost of the constructed improvements to land, such as driveways, walkways, lighting, and parking lots. Land Improvements will be depreciated over their useful life by debiting the...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
Refers to the accounting associated with the preparation of the main financial statements: income statement, balance sheet, statement of cash flows, statement of retained earnings, statement of stockholders’...
One of the main financial statements (along with the income statement and balance sheet). The statement of cash flows reports the sources and uses of cash by operating activities, investing activities, financing...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
Is the deposit for a booth at a future trade show an asset? The deposit for a booth at a future trade show is an asset until the trade show occurs. Once the trade show occurs the deposit amount should be moved from the...
Financial statements that show more than the current year’s amounts. For example, it is generally accepted that a corporation’s income statement will show the most recent three years of results. This provides...
The systematic allocation of the premium on bonds payable (reported as a credit in a liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize the premium contains a debit to...
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
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