An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
A liability account containing the amount of premium on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
A distribution of part of a corporation’s past profits to its stockholders. A dividend is not an expense on the corporation’s income statement.
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
An amount that should be charged to the current accounting period as an expense.
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
A miscellaneous expense account used to record the difference between the amount of cash needed to replenish a petty cash fund and the amount of petty cash receipts at the time the petty cash fund is replenished.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
The cumulative amount of depletion expense pertaining to the natural resources shown on the balance sheet. The account has a credit balance and will be reported on the balance sheet as a contra asset.
Often a liability representing the differences between the income tax expense associated with the revenues and expenses reported on a corporation’s income statements and the actual income tax appearing on the...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
See accrued rent expense. Also see accrued rent income.
Long term assets that are not classified as investments, property, plant, equipment, or intangible assets. An example is bond issue costs that are amortized to expense over the life of the bonds.
A contra liability account containing the amount of discount on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
An amount that is expensed immediately. For example, routine repair costs on equipment are revenue expenditures because they are charged directly to an income statement account such as Repairs and Maintenance Expense.
A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.
A word used by accountants to communicate that an expense has occurred and needs to be recognized on the income statement even though no payment was made. The second part of the necessary entry will be a credit to a...
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
A general ledger account which serves to summarize similar transactions. For example, all of the closing entries involving operating expenses might be posted to an operating expense clearing (or summary) account.
A revenue, expense, gain, or loss account. To learn more, see Explanation of Income Statement.
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
sales discounts, sales returns, and sales allowances. 11. A company had gross sales of $100,000; sales returns of $1,500; sales allowances of $400; sales discounts $100; bad debts expense of $1,800; cost of goods sold...
Where are accruals reflected on the balance sheet? Definition of Accruals The accrual of expenses and liabilities refers to expenses and/or liabilities that a company has incurred, but the company has not yet paid...
, 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...
of the unamortized bond premium. Debit Wrong. Credit Right! 4. The amortization of the bond __________ will result in the issuer's interest expense being greater than the interest payments. Discount Right! Premium...
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...
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...
or discount on bonds payable that results in the same amount each period is the __________–__________ method of amortization. 8. Under the __________ interest rate method of amortizing bond discount, the amount of...
. Another name for the balance sheet is the statement of financial __________. 5. The unexpired portion of prepaid insurance is __________. Select... a current asset a current liability an expense 6. A retailer’s...
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...
are required by the __________ principle. 6. The adjusting entry for depreciation will include a debit to Depreciation Expense and a credit to __________ __________. 7. Adjusting entries help to convert accounting...
to rent some special equipment for $2,000. The contractor will bill the client $19,000 on January 10 and will pay the equipment rental company on January 10. Under the accrual method of accounting the contractor had...
. Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
from creditors (and the remaining 27% came from stockholders). 6. JamCorp’s income statement for its most recent year reported the following: Net sales $500,000 Cost of goods sold $350,000 Selling and admin expenses...
a bill by writing a check, the account Cash is __________. Select... credited debited 19. The account that is debited when a sole proprietor withdraws some of the business’s cash for personal use is __________....
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...
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...
, the corporation’s assets decrease and its stockholders’ equity decreases. Since a corporation will have thousands of transactions involving revenues and expenses, it is useful to have: Separate accounts for every...
The description of the required reporting of expenses by some nonprofits. The expenses will be presented on lines based on the nature of the expense (salaries, fringe benefits, rent, utilities, postage, professional...
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