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 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 the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
of operating income is shown. As a result, the income statement allows for an easy comparison of the operations and profitability of companies regardless of their debt and interest expense. Join PRO to Track Progress...
. 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 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.
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
OCDSEL Unscramble CLOSED OSDELC Unscramble 7. Sales minus the cost of goods sold is gross _________. PROFIT ITFORP Unscramble PROFIT IOTFPR Unscramble 8. Selling, general and administrative (SG&A) expenses are...
IENMCO Unscramble 11. The statement of cash flows reports amounts according to three activities: _____________, financing, and investing. OPERATING ROTAGEINP Unscramble OPERATING NIPAOTERG Unscramble 12. The amount of...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
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...
. A current asset is an asset that will turn to cash or be consumed within the longer of 1) one year, or 2) the __________ cycle. 21. A corporation’s stockholders’ equity section of its balance sheet could contain...
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...
flows, the proceeds from the sale of a long-term asset is reported as a positive amount in the investing activities section. Since the gain on the sale is included in the net income, the gain is shown as a deduction...
divided by the interest expense of $150,000). Since the interest coverage ratio is based on the net income under the accrual method of accounting, we recommend that you also review the corporation’s cash provided by...
What is a rolling budget? Definition of Rolling Budget A rolling budget often refers to a company’s operating budget which presents the future monthly budgets for the next 12 months. A rolling budget is also known as a...
the depreciation expense had reduced net income but cash was not reduced. In other words, the positive $8,000 of depreciation expense is not a source of cash, it is merely a needed adjustment to convert the accrual net...
of the gas bill is the cost of heating the building. These two components of the gas bill are fixed since they will not change when the bakery produces more or less loaves of its bread. However, a third component of the...
parentheses, and the cash outflows are shown in parentheses. The major cash flows are arranged in the financial statement as follows: Operating activities Investing activities Financing activities Join PRO to Track...
used. However, the accountant is likely to skip recording of the asset and will record the purchase as a $900 operating expense. Example 2. A local dealer purchases large quantities of propane and then delivers the...
amount, since reducing inventory has a positive effect on the company’s cash balance.) Additional Information The change in the inventory is reported as an adjustment to the company’s net income in the cash from...
used in a company’s peripheral activities will reduce the company’s non-operating (or other) income. Examples of Depreciation Expense Reported as an Administrative Expense The depreciation of the following assets...
is considered to be nonoperating income or other income. (However, banks and other lenders, whose primary activities involve earning interest, will report their interest earned as part of their operating income.)...
electricity to customers for up to one month before it reads the customers’ meters, calculates the bills and records the billings as revenues and accounts receivable. As a result, the electric utility will have up to...
and operating budgets. When standard costs are used in a manufacturing setting, a product’s standard cost for a future accounting period will consist of the following: Direct materials: a standard quantity of each...
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...
statement reports the following financial information: Cash provided and used in the company’s operating activities Cash provided and used in the company’s investing activities Cash provided and used in the...
What is the difference between expenses and payments? Definition of Expenses and Payments Under the accrual method of accounting, expenses are costs that have been used up or have been incurred in the process of earning...
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
flows: cash from operating activities cash dividends paid (part of the cash flows from financing activities) For a U.S. corporation with stock that is publicly traded, it is wise to review the pertinent parts of its...
, June 30, etc.) Statement of cash flows. This statement reports the major causes for the change in cash and cash equivalents during the accounting period. The cash flows are presented as operating, investing, or...
is an outflow of cash, it is reported as a negative amount. Financial analysts may subtract the capex amount from the company’s cash from operating activities to arrive at the company’s free cash flow. Examples of...
) in the investing activities section. Many financial analysts subtract the capital expenditures amount from the cash from operating activities to arrive at the company’s free cash flow. Examples of Capital...
issue bonds to finance projects, operating deficits, or to redeem older bonds that are maturing. For example, a profitable public utility might finance half of the cost of a new electricity generating power plant by...
of $20,000 a year for 10 years. The current year’s income statement is reporting depreciation expense of $20,000 but there is no cash payment in the current year for this expense. This is why depreciation expense is...
income statement. Since the costs of products may be higher when they are reordered/purchased, the order in which their costs are removed from inventory will have an impact on the inventory valuation and the amount...
inventory costs on the balance sheet because the latest, higher costs were removed from inventory ahead of the older lower costs LIFO means that the cost of goods sold on the income statement will contain the higher...
Revenues and debit Commissions Receivable provided there is certainty that the commissions will be collected. The amount of Commission Revenues will be reported on the income statement as one of the company’s...
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