the average based on the average throughout the year. Average Collection Period or Days’ Sales in Receivables The average collection period tells how many days (on average) it takes to collect a company’s accounts...
the average based on the average throughout the year. Average Collection Period or Days’ Sales in Receivables The average collection period tells how many days (on average) it takes to collect a company’s accounts...
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...
If the amount of the discount or the premium on bonds payable is not significant, the corporation may amortize the discount or premium using the straight-line method of amortization. This means that each accounting...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
the period of time shown in the heading of the income statement. The period of time (or time interval) could be a year, quarter, five months, one month, 52 weeks, 4 weeks, etc. If the corporation’s shares of common...
-in capital and deferred revenues Retained earnings and net income Paid-in capital and retained earnings 16. A new corporation’s first transaction involves earning service fees from a client. The client is allowed to...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
insurance is known as a __________-type or prepayment-type adjusting entry. 3. Adjusting entries are usually dated as of the __________ day of the accounting period. 4. An adjusting entry usually involves an __________...
amount that the company received in advance of earning it The amount received that has not yet been earned 10. A credit balance in a company’s Accumulated Depreciation account usually indicates which of the following?...
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...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
a corporation’s revenues, expenses, gains, losses, and net income for a month, year, etc. The accrual method is also the preferred method for reporting a corporation’s assets, liabilities, and stockholders’ equity...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
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...
of an accounting period. balance sheet (or) statement of financial position This financial statement reports a corporation’s assets, liabilities and stockholders’ equity as of the last moment of an accounting...
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...
with revenues (instead of recognizing or reporting an expense when it is paid). The accrual method also results in the reporting of revenues in the accounting period in which they were earned (instead of reporting them...
of $10,000, for a net amount of $110,500. The income statement for the accounting period will report Bad Debts Expense of $10,000. Aging of Accounts Receivable Form and Template Balance Sheet: Retail/Wholesale –...
accounting period. Subtracting accumulated depreciation from an asset’s cost results in the asset’s book value or carrying value. Hence, the credit balance in the account Accumulated Depreciation cannot exceed the...
%). It also indicates that a company without sufficient cash to pay within the early payment discount period will experience a huge opportunity cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
of Accounts Payable. If a company owes for goods and services but the amounts are not yet recorded in Accounts Payable as of the end of each accounting period, the amount must be recorded with an adjusting entry. The...
statements for the period ending December 31 must report wages expense of $5,000 and a liability of $5,000 as of December 31. In accounting jargon, the retailer must accrue the expense and liability through an adjusting...
What is a natural business year? Definition of Natural Business Year A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of the organization’s activities...
, average) for removing the costs from inventory and sending them to the cost of goods sold. Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that have been sold to customers during the...
The sole proprietorship of J. Lee will include the following capital accounts: J. Lee, Capital, which is increased by J. Lee’s investment into the business plus each accounting period’s net income, and which is...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
cycle is longer than one year, the length of the operating cycle is used in place of the one-year time period. Examples of Current Assets Assets that are reported as current assets on a company’s balance sheet...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
time period. 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 job Refresh your skills to re-enter the...
accounting periods. Most of these payments will be recorded as assets until the appropriate future period or periods. Sometimes these amounts are referred to as prepayments. Before a balance sheet is prepared, the...
as a current liability such as Accrued Expenses Payable. On the corporation’s income statements, the interest that occurred (whether paid or not paid) during the period of the income statement will be reported as...
What is the difference between adjusting entries and correcting entries? Definition of Adjusting Entries Generally, adjusting entries are required at the end of every accounting period so that a company’s financial...
will be the following: Debit Premium on Bonds Payable for $3,000 Credit Interest Expense for $3,000 Reducing the balance in the account Premium on Bonds Payable by the same amount each period is known as the...
. If the general office worker comp rates are 0.2% of the general office wages and salaries, then 0.2% of January’s general office wages and salaries will be expensed as worker comp insurance expense. If the employer...
What does it mean to recognize an expense? Definition of Recognize an Expense To recognize an expense means to report the proper amount of an expense on the income statement for the appropriate accounting period. When...
day, but the balance sheet amounts represent the amount at the instant or moment after all of the transactions of the specified day have been recorded. We avoid saying that the balance sheet is for the day, since the...
on the income statement. Therefore the plant asset’s carrying amount will be decreasing each period. The going concern assumption implies that the company will be continuing in business. Since it is assumed that the...
will appear as expenses on the income statement. Unfortunately those recorded costs may not measure the economic reality that is occurring in the period of the income statement. Join PRO to Track Progress Mark the...
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