targeted or planned profit margin ratio for the current accounting period, and 3) the profit margin ratios of other companies in the same industry during the same accounting period. Example of Profit Margin Ratio Assume...
targeted or planned profit margin ratio for the current accounting period, and 3) the profit margin ratios of other companies in the same industry during the same accounting period. Example of Profit Margin Ratio Assume...
. As the amount of prepaid insurance expires, the expired portion is moved from the current asset account Prepaid Insurance to the income statement account Insurance Expense. This is usually done at the end of each...
What is a revenue expenditure? Definition of Revenue Expenditure A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place. Revenue expenditures are often discussed...
.) This rent does not get assigned or allocated to the units produced. Instead, the entire rent of the nonmanufacturing facilities is immediately expensed in the accounting period when the building is rented. Example of...
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
What is capex? Definition of Capex Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following: Actual amounts that were spent during...
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
a company was during a time interval (period of time), such as a year, quarter, month, 52 weeks, etc. Costs that occurred but are not yet expensed on the income statement are typically referred to as deferred costs,...
What is insurance expense? Definition of Insurance Expense Under the accrual basis of accounting, insurance expense is the cost of insurance that has been incurred, has expired, or has been used up during the current...
during the asset’s construction The interest on the debt related to the asset’s construction Adding the capitalized interest to the asset’s cost instead of reporting it as interest expense of the current...
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...
What is a recurring journal entry? Definition of Recurring Journal Entry A recurring journal entry is a journal entry that is recorded in every accounting period. Some recurring journal entries will involve the same...
that matures 5 years later for $287,832. The investor will receive the following cash flows: semiannual interest of $10,500 at the end of each of the 10 six-month periods + $300,000 at the end of the 10th six-month...
sheet account that is reported under the heading of Property, Plant and Equipment. The asset’s cost (except for the cost of land) will then be allocated to depreciation expense over the useful life of the asset. The...
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...
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...
statement information will be incorrect: The balance sheet at the end of the current accounting period will report too little inventory. This in turn means the amount of current assets, the amount of total assets, the...
a cost has no future benefit that can be measured. When an expense occurs and cash has not yet been paid, a liability account will also be recorded. (The expenses that were not paid in the current accounting period will...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
component and a variable component. Mark as wrong Mark as right break-even point in units This is the result of dividing a company’s fixed expenses for a period of time by the contribution margin per unit of product....
sheet, statement of cash flows, and statement of stockholders’ equity. Mark as wrong Mark as right balance sheet (or) statement of financial position This financial statement reports a corporation’s assets,...
that reports the company’s revenues and expenses is the __________. Select... balance sheet income statement statement of cash flows 3. The heading of the balance sheet will indicate which of the following? Select......
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...
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...
-purpose financial statements include investors, lenders, government agencies, etc. **Note that the balance sheet reports amounts as of the final moment of the accounting period. For example, the balance sheet’s...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
as right periodicity assumption (or) time period assumption This accounting guideline allows a business to report its ongoing operations in short time intervals such as years, quarters, months, etc. periodicity...
and purchase returns and allowances equals __________ __________. 4. The cost of goods sold is the net purchases plus or minus the change in __________ from the beginning to the end of the period. 5. Goods in transit at...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the warehouse employees have earned during the accounting period indicated in the heading of the...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
A liability account that reports an insurance company’s premiums received from its insured that have not yet been earned. For example, if the insurance company receives $600 on January 27 for an insured’s...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
Usually financial statements refer to the balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholders’ equity. The balance sheet reports information as of...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
and related fringe benefits) is part of the cost of the asset (and not an immediate expense of the accounting period). The total cost of the asset, including installation costs, will become an expense when the asset...
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