are considered to be operating expenses and are presented on the income statement as SG&A expenses. (SG&A is the acronym for selling, general and administrative expenses.) Sales commissions are not part of the...
are considered to be operating expenses and are presented on the income statement as SG&A expenses. (SG&A is the acronym for selling, general and administrative expenses.) Sales commissions are not part of the...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
Under the accrual basis of accounting, the Interest Revenues account reports the interest earned by a company during the time period indicated in the heading of the income statement. Interest Revenues account includes...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
Sales. Its detailed purchases and changes in inventory will be presented as one amount with the description Cost of Goods Sold. Perhaps thousands of operating expenses will be presented as one amount with the...
of producing the furniture are indirect product costs, since they must be allocated to the furniture based on labor hours, machine hours, or some other activities. However, the indirect product costs could be direct...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
to arrive at net income available for common stock.) The statement of cash flows will report the amount of the cash dividends as a use of cash in the financing activities section. Join PRO to Track Progress Mark the...
bookkeepers may be involved in the following activities: Processing vendors’ invoices Billing and following up on accounts receivable Payroll processing Managing cash Reconciling account balances Perhaps preparing and...
What is benchmarking? Benchmarking is a process for improving some activity within an organization. We will illustrate benchmarking with the following example. Company Q has identified one of its activities that needs...
the heading financing activities statement of stockholders’ equity as a subtraction from retained earnings Dividends that were declared but not yet paid are reported on the balance sheet under the heading current...
on their statement of activities according to the following functions: Each of its major programs Management and general Fund-raising Membership development In addition, not-for-profit organizations report their...
activities. These indirect costs include repairs and maintenance, depreciation of the manufacturing equipment, utilities, salaries of manufacturing supervisors, etc. Join PRO to Track Progress Mark the Question as Read...
to the account Cash. Effect of Drawings on the Financial Statements The owner’s drawings will affect the company’s balance sheet by decreasing the asset that is withdrawn and by the decrease in owner’s equity. 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...
. Mark as wrong Mark as right current assets This section of the balance sheet reports the company’s cash plus resources which are usually expected to turn to cash within one year of the balance sheet date (or within...
a carrying amount or book value of $2,100,000. (The corporation will then amortize the Premium on Bonds Payable to Interest Expense over the life of the bonds.) Definition of Contra Account A contra account is a general...
triple or drop to be 20% of the normal amount, the rent will likely have to change. Nonetheless, the present rent of $2,000 is considered to be a fixed expense since the extreme conditions are outside of the relevant...
a mathematical tool known as simple linear regression analysis. This will calculate the fixed expenses (a) and the variable rate (b) based on the historical observations. Example of Mixed Costs The annual expense of...
by reading our Adjusting Entries (Explanation). 1. What type of entry will increase the normal balance of the general ledger account Service Revenues? Debit Wrong. Credit Right! Since revenues cause stockholders'...
for Various Activities The activities that could cause flexible budgets to flex might be the amount of sales, units of output, machine hours, miles traveled, etc. Join PRO to Track Progress Mark the Question as Read...
statement’s heading indicates a period of time (or time interval) such as the year ending December 31? Select... Balance sheet Income statement 3. Total revenues minus total expenses is __________. Select... gross...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
What is a noncurrent asset? Definition of Noncurrent Asset A noncurrent asset is an asset that is not expected to turn to cash within one year of date shown on a company’s balance sheet. (This assumes that the company...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
What is going concern? Definition of Going Concern The going concern assumption is a basic underlying assumption of accounting. For a company to be a going concern, it must be able to continue operating long enough to...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services,...
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
. Synergy is sometimes described as 1 + 1 = 3. Let’s use an example. Suppose a company operates solely in the U.S. Another company operates in Asia. The two companies decide to merge because they believe the combined...
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...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
statements also referred to as pro-forma financial statements Once prepared and approved, the budgeted amounts are used as a guide or road map in controlling the next year’s business activities. Example of Capital...
and documentation of the warehousing activities required by zero-based budgeting may lead to a better use of space, better inventory management, etc. If those efficiencies are achievable, perhaps the budget for the...
that are affected by the Statement. In the left panel of the website, the first four links (Recent Additions, Action Alert, Project Activities, and Exposure Documents) allow you to monitor the status of rules being...
as the truck is “used up” in the company’s revenue-generating activities. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
year is reported under investment activities on the statement of cash flows. Definition of Revenue Expenditure A revenue expenditure is an amount that is spent for an expense that will be matched immediately with the...
What is a natural business year? Definition of Natural Business Year A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of the organization’s activities...
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