. If the transaction is a direct conversion of debt to equity (shares of stock) or debt to bonds and no cash receipts or cash payments occur, the transaction is to be disclosed as supplementary information. This...
. If the transaction is a direct conversion of debt to equity (shares of stock) or debt to bonds and no cash receipts or cash payments occur, the transaction is to be disclosed as supplementary information. This...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
to a decision maker will the data become information. While that is the distinction that I learned many years ago, I believe that most people use the terms information and data interchangeably. In other words, one...
Beginning in 2018, this is one of two classifications of net assets reported on the financial statements of a not-for-profit organization’s financial statements. This classification is to be used instead of the...
spreadsheets. With the introduction of VisiCalc (the original electronic spreadsheet) followed by other electronic spreadsheets or worksheets (e.g., Lotus 1-2-3, Excel), the use of columnar pads of paper declined...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
consist of the following: Property, plant and equipment (fixed assets) Long-term investments Intangible assets Deferred charges and other noncurrent assets Join PRO to Track Progress Mark the Question as Read Must-Watch...
What is depreciation? Definition of Depreciation In accounting, depreciation is the assigning or allocating of the cost of a plant asset (other than land) to expense in the accounting periods that are within the...
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
. The adjusting entry amounts must also be included in the amounts reported on the balance sheet as of the end of the accounting period. In the following accounting period, the accrual-type adjusting entries will usually...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
. This estimated amount is used to calculate the asset’s depreciation expense and it is often assumed to be zero. The term residual value may have other uses as well. For example, it is used when discussing leased...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
What is a real account? Definition of a Real Account A real account is a general ledger account that does not close at the end of the accounting year. In other words, the balances in the real accounts are carried over to...
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
What is the difference between net cash flow and net income? Definition of Net Cash Flow Net cash flow is the combination of the cash received and the cash disbursed. In other words, it is the combination of the debit...
to be removed from inventory and matched with the sales revenues reported on the income statement. This means that the oldest costs remain in inventory. LIFO became popular due to inflation and the fact the U.S. income...
entries These journal entries are used to accrue and defer amounts and will involve a balance sheet account and an income statement account. Mark as wrong Mark as right matching principle This accounting principle...
basis, such as $50,000 per year. Many employees working in a company’s general office will be paid a salary. Often the salaries are paid semi-monthly. That is, one pay date will be the 15th day of the month for...
capital expenditure projects are required and may not increase a company’s profits…think OSHA or environmental mandates Some of projects will provide cost savings through faster operations or reductions in manual...
. (These are in addition to the other product and production costs of direct materials and direct labor.) Since the fixed manufacturing overhead costs (such as depreciation, salaries of manufacturing personnel, etc.) are...
, the Cash account (not the Petty Cash account) will be credited. The debits will go to the expense accounts indicated by the petty cash receipts, such as postage expense, supplies expense. In other words, the general...
be recorded in an expense account (such as Cost of Goods Sold) Their cost could be recorded in an asset account (such as Inventory) Either way, the Inventory account must be adjusted to the actual amount. The other part...
What is a bookkeeper? Definition of Bookkeeper A bookkeeper is usually employed by a small to mid-size company (or other organization) to process and record the large volume of transactions involving sales, purchases,...
under the heading of other income. Calculating a Gain To illustrate the calculation of a gain, let’s assume that the retailer sells its old van for $5,000 cash. At the time of the sale the van is on the retailer’s...
’ managements. In the U.S., some companies have annual accounting periods that end on dates other than December 31. For example, a company could have a fiscal year of July 1 through the following June 30. Its quarterly...
for the product. The repair bill was the same $400. In this situation you will not be foregoing any sales or losing any customers. Therefore the profit foregone is $0. In other words, there is no opportunity cost of the...
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...
to the goods produced in that month Examples of Normal Costing and Actual Costing Assume that a manufacturer experiences an additional $200,000 in manufacturing overhead costs (air conditioning and other) in each of the...
Is the sale of a plant asset recorded in the sales account? Definition of Sale of a Plant Asset The sale of a plant asset is often the disposal of a company’s equipment (or other asset) that had been used in the...
that should have been used to make the good output. In other words, the actual quantity of materials used to make the good output was different from the standard quantity of materials that should have been used. The...
six years especially in relation to each other. To illustrate, we will designate 2017 to be the base year and the 2017 amounts will be restated to be 100. The amounts for the years 2018 through 2023 will be presented...
’ earnings, and 2) the employer’s portion of the FICA and unemployment taxes. Mark as wrong Mark as right current liabilities This balance sheet classification represents a company’s obligations that are due within...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
this and other important information pertinent to the income statement and the other financial statements. Mark the Cheat Sheet as Complete Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
Break-even Point Break-even Point The break-even point is the level of sales that result in a business having a net income of zero. In other words, its revenues will be exactly equal to its expenses. The break-even point...
is a liability account. Liability accounts have CREDIT balances. Liabilities are on the right hand or credit side of the accounting equation. Credit Right! Liability accounts normally have credit balances. Cash Debit...
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