amount will not be an expense and therefore will not be reported on the income statement. The principal payment is recorded as a reduction of the liability Notes Payable or Loans Payable. (Both the receipt of the loan...
amount will not be an expense and therefore will not be reported on the income statement. The principal payment is recorded as a reduction of the liability Notes Payable or Loans Payable. (Both the receipt of the loan...
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...
December income statement as Insurance Expense of $400. The remaining $2,000 of unexpired insurance (5 months X $400) must be reported on the December 31 balance sheet as a current asset such as Prepaid Insurance or...
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...
is required: The income statement must report the estimated uncollectible accounts expense (bad debts expense, doubtful accounts expense) that occurred during the accounting period The balance sheet must report in the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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.
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
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...
plan, a deferred profit sharing plan, and/or a charitable giving plan may require an expense of 25% of its pretax profits. In addition, a U.S. corporation might have a combined federal and state income tax rate of...
of accounting. Examples of Adjusting Entries The following are hypothetical examples of adjusting entries: Each day the company incurs wages expense for its hourly-paid employees. However, the payroll that includes the...
. The entry to write off the bad account under the direct write-off method is: Debit Bad Debts Expense (to report the amount of the loss on the company’s income statement) Credit Accounts Receivable (to remove the...
income. However, there are two noteworthy differences: The income statement of the sole proprietorship does not report as an expense any salary or wages for the owner working in the business. However, the regular...
issue costs to Interest Expense over the remaining life of the bonds. (Bonds are likely to mature 10 years or more after they are issued.) The most precise way to amortize these amounts is to use the effective interest...
the production equipment is variable, but the portion of the electricity cost used to light and air condition the manufacturing facility is fixed. These simple examples show it can be difficult to understand how costs...
and the money received from lenders will not appear on the income statement. Neither will the money spent to repay loans or money spent for equipment or buildings. In addition to the cash amounts arranged into three...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
is the difference between the total amount of assets and the total amount of liabilities as reported on the balance sheet, the corporation’s book value is not the market value of the corporation. Two reasons for the...
a $9,100 increase in cash (receipts of $10,000 minus payments of $900). Now assume that a different company had a profit of $60,000 in its first year, but paid out $65,000 near the end of the year to acquire equipment...
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
of machine hours. Example of Fixed Overhead Absorbed Assume that TOPCO has budgeted next year’s fixed manufacturing overhead costs to be $2,000,000 (consisting of depreciation on its equipment, salaries of the...
they occur. Examples of Manufacturing Overhead Some examples of manufacturing overhead costs include the following: depreciation, rent and property taxes on the manufacturing facilities depreciation on the manufacturing...
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...
of Long-term Assets Long-term assets include long-term investments in financial securities, property, plant, equipment, and intangible assets. Definition of Proceeds from Long-term Assets The money a company receives...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
such as equipment are recorded in the general journal.) 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...
and disposal. net property, plant and equipment. The recorded costs of the tangible noncurrent assets used in the business minus the related accumulated depreciation. accounts receivable, net. The recorded amount of...
to the products that require the activities. Example of Traditional Method of Cost Accounting Assume that a manufacturer has $2,000,000 of manufacturing overhead costs consisting of depreciation, electricity, insurance,...
on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
What is a lease? Definition of a Lease Typically, a lease is a written agreement between an owner of property (land, building, equipment, vehicle, etc.) and a person or business that will use the property for a stated...
An example of a variable cost is the cost of flour for a bakery that produces artisan breads. The greater the number of loaves produced, the greater the total cost of the flour used by the bakery. An example of a fixed...
decisions.) Examples of Indirect Manufacturing Costs Some examples of indirect manufacturing costs include: depreciation, repairs and maintenance, electricity, etc. for the production facilities and the production...
in the control account. To find the amount that a specific customer owes, its recent payments, and its recent purchases on credit, you will quickly get that information from the Accounts Receivable Subsidiary Ledger....
: $10,000 of assets = $0 of liabilities + $10,000 of owner’s equity. Next, let’s assume the company purchases equipment at a cost of $3,000 and signs a promise to pay the $3,000 within six months. Now the company’s...
equipment manufacturer with a high demand product that takes six months to manufacture. If this manufacturer has few or no competitors, a great product, and an excellent reputation for service, its profit margin can be...
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...
for calling on customers. For this service, New Corp agrees to pay commissions of 5% of sales with payment made 10 days after the month ends. Assuming that December’s sales are $100,000 New Corp will be incurring...
include this type of account. EXPENSE PENESXE Unscramble EXPENSE EXPEENS Unscramble 7. A common adjusting entry pertaining to plant assets is the recording of ______________. DEPRECIATION ODAPNTIERIEC Unscramble...
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