Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
The one-year period ending at an organization’s typical low point of activity. For example, a school’s natural business year is July 1 through June 30. It is practical to have the accounting and financial...
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...
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
Sorting and reporting expenses according to the type of activity for which the expense was incurred. The functional expense classifications for a nonprofit organization would be Program #1, Program #2, Management and...
Usually referred to as the SEC. The U.S. government agency which has regulatory power over the U.S. stock exchanges and the reporting requirements of the corporations whose stock is traded on those stock exchanges. The...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
Assets = Liabilities + Owner’s Equity. For a corporation the equation is Assets = Liabilities + Stockholders’ Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets....
An organization established by the U.S.’s Sarbanes-Oxley Act to oversee the auditors of corporations whose stock is publicly-traded. The PCAOB’s board members are appointed by the Securities and Exchange...
What is a single-step income statement? Single-Step Income Statement Definition A single-step income statement arrives at a company’s net income in one step or subtraction: [total revenues and gains] – [total...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
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...
Is depreciation an operating expense? Depreciation Could Be Either an Operating Expense or a Non-operating Expense Depreciation is an operating expense if the asset being depreciated is used in an organization’s main...
What is a trial balance? Definition of a Trial Balance A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization’s general ledger accounts. (Often the accounts with zero...
What is a balance sheet and why is it prepared? Definition of Balance Sheet The balance sheet is prepared in order to report an organization’s financial position at the end of an accounting period, such as midnight on...
What is the difference in salaries between a bookkeeper and an accountant? I estimate that a bookkeeper’s salary will be less than half of an accountant’s salary. For example, an accountant with a year or two of...
This visual tutorial for the topic Income Statement presents the key components and formats used on a corporation's income statement (which is also known as the statement of operations or profit and loss statement). The...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
Is Accounts Payable a debit or a credit or both? Definition of an Accounts Payable Credit Since Accounts Payable is a liability account, it should have a credit balance. The credit balance indicates the amount that a...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
The revenue classification used by nonprofit organizations to account for the amounts received as donations. It is also an expense classification for the donations made to another nonprofit organization. Contributions...
How does inflation affect the cost of goods sold? Inflation and the Cost of Goods Sold Generally speaking, a company selling goods during periods of inflation will see an increase in its cost of goods sold. When and by...
What is a multiple-step income statement? Multiple-Step Income Statement Definition A multiple-step income statement presents two important subtotals before arriving at a company’s net income. For a company that sells...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At best,...
See cost-volume-profit (CVP).
Income Statement (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (37) Marked Wrong (0) Marked Right (0) income statement (or) statement of earnings (or) statement of operations This financial...
Accounting Principles (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (18) Marked Wrong (0) Marked Right (0) accounting principles This term refers to the basic underlying accounting...
What does it mean to report expenses by function? Definition of Reporting Expenses by Function Reporting expenses by function means to classify and report expenses according to the type of activity for which the expenses...
Break-even Point 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...
Financial Ratios Financial Ratios Including Limitations Financial ratios are one component of financial analysis. Financial ratios are often calculated by using amounts from previously issued annual financial statements....
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...
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
Usually a department within a company that is responsible for its costs but not revenues or profit.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
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