on the disposal, the owner’s equity is unchanged. On the other hand, if the same truck is sold for $3,000 there will be a $2,000 loss ($3,000 of cash received versus the $5,000 of book value removed) reported on the...
on the disposal, the owner’s equity is unchanged. On the other hand, if the same truck is sold for $3,000 there will be a $2,000 loss ($3,000 of cash received versus the $5,000 of book value removed) reported on the...
is a debit balance. In other words, the corporation has a negative amount of retained earnings. Example of Deficit Within Stockholders’ Equity Assume a corporation was formed just over three years ago. In its first...
by $1,400,000 of average total assets). This ratio will vary by industry, as some industries are more capital intensive than others. Always compare your company’s financial ratios to the ratios of other companies in...
independently. The synergy might come from shared research, ability to meet the needs of each other’s customers, ability to attract new customers that want a single global supplier, elimination of duplicate...
Financial information posted on a corporation’s website Financial reports to governmental agencies including quarterly and annual reports to the Securities and Exchange Commission (SEC) Prospectuses pertaining to the...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account....
the defined benefit pension plan, the employer commits to depositing enough money into a pension fund in order to cover the future benefits. Since there is uncertainty in the investment returns, the life expectancy of...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
a number is assigned for reference and control. Receipts or other documentation justifying the disbursement should be attached to the petty cash voucher. When the petty cash fund is replenished, the completed petty cash...
What is a comparative balance sheet? Definition of Comparative Balance Sheet A comparative balance sheet typically has two columns of amounts that appear to the right of the account titles or other descriptions such as...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
, there are occasions when the general ledger expense accounts will be credited. Examples of Expenses being Credited Below are some examples of when general ledger expense accounts are credited: When recording closing...
, and the production volume variance are generally not related to the efficiency of the operations. On the other hand, the materials usage variance, the labor efficiency variance, and the variable manufacturing...
One component of the payroll tax referred to as FICA. (The other component of the FICA tax is the Medicare tax.) The Social Security tax is levied by the U.S. government on both the employee and the employer. In 2024 the...
that are needed for the external financial statements which must comply with US GAAP. Other topics involve analyses and reports that are not distributed outside of the company but are used by management in its decision...
track the total amounts of refunds that you make during a year. On the other hand, if it is rare for your organization to refund registration fees, you could simply 1) debit the amount you are refunding to the normal...
by one of the 50 U.S. states (or one of the five other jurisdictions). The CPA’s license is renewed if the state’s continuing professional education requirements are met. Examples of a Certified Public Accountant...
What is the difference between financial accounting and management accounting? Definition of Financial Accounting Financial accounting has its focus on the financial statements which are distributed to stockholders,...
the following will be attached: vendor’s invoice, company’s purchase order, company’s receiving report, and other information needed to further process the vendor’s invoice for payment. Join PRO to Track...
of $1,000,000 in total assets. The company’s return on assets ratio for the year was 6% ($60,000 divided by $1,000,000). This company’s return on assets can be compared to other companies in the same industry. Join...
is headed Debit and the other column is headed Credit Each account’s balance is listed in the appropriate column After all of the account balances are entered, each column is summed The total of the debit column...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
instead of 30 days) Purchases Returns and Allowances (credit memos received for returning goods to vendors or for other conditions) These accounts are used by a company that purchases goods for resale and uses the...
using the asset. Since it is difficult to precisely match a productive asset’s cost to a company’s revenues, the asset’s cost is usually allocated to the years in which the asset is used. In other words,...
What is trading on equity? Definition of Trading on Equity Trading on equity, which is also referred to as financial leverage, occurs when a corporation uses bonds, other debt, and preferred stock to increase its...
consolidated statements of operations. The other six corporations used one of the following titles: consolidated statements of income, consolidated statements of earnings, or consolidated results of operations. In the...
to its holiday season, a retailer borrows $200,000 from its bank and promises to repay the bank in three months plus interest of $3,000. On each of the retailer’s monthly income statements, it will report $1,000 of...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
such as buildings, equipment, furnishings and vehicles is known as depreciation. The systematic expensing of the cost of natural resources is referred to as depletion. The systematic expensing of other long-term costs...
to the product, such as the aluminum in beverage cans Direct labor , which are the wages and fringe benefits earned by the individuals who are physically involved in converting raw materials into a finished product...
What is absorption costing? Definition of Absorption Costing Absorption costing (also known as full absorption costing) indicates that all of the manufacturing costs have been assigned to (absorbed by) the units of goods...
statements) at the time that an order is received: The company has not yet earned the revenue The company does not yet have a right to a receivable or other asset The revenues and a receivable will not be earned until...
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 $240,000 it will be shown as 60% ($240,000 divided by $400,000). The sum of the liabilities and owner’s equity will also be 100%. The vertical analysis of the balance sheet will result in a common-size balance...
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...
the split. An investor owning 100 shares before the stock is split 2-for-1 will have 200 shares after the split. Stock Price After a Stock Split Since the corporation is not changed (total assets, liabilities,...
bank account balance to reduce the balance because its customers’ account balances are liabilities for the bank. For instance, when the bank records a customer’s deposit, the bank debits its Cash account and credits...
, production or some other activity. Common classifications related to this are fixed, variable, and mixed. cost behavior This refers to how costs will change in total when there is a change in sales, production or some...
to J. Smith, Drawing when a withdrawal occurs. Select... Debit Credit 28. To charge an account means to __________ an account. Select... debit credit 29. Both assets and expenses will normally have debit balances....
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