years all expressed in easier to absorb amounts. Example of Trend Analysis Assume you want to see the trend of a service company’s revenues, net income, and number of clients during the years 2017 through 2023. With...
years all expressed in easier to absorb amounts. Example of Trend Analysis Assume you want to see the trend of a service company’s revenues, net income, and number of clients during the years 2017 through 2023. With...
that the company’s net purchases for the year amounted to a net debit of $300,000. This $300,000 debit and the credit of $15,000 in Inventory Change results in the cost of goods sold of $285,000. The logic is that not...
by bookkeepers to indicate the right side of an account is __________. 9. Recording a debit and credit amount for every transaction is referred to as __________-entry bookkeeping or accounting. 10. The normal balance...
The account in which the owner’s investment is recorded plus the net income earned by the company minus the draws made by the owner. Current year net income and draws will be in temporary accounts until the end of...
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
A document issued to a customer by a seller which reduces the seller’s accounts receivable and its net sales. It also reduces the buyer’s accounts payable and net purchases. A document issued by a bank that...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
to the present. The rate that discounts the cash flows to a net present value of zero is the internal rate of return. Payback Wrong. The payback model uses the cash flows from the project to determine the time needed to...
__________ fund is an asset restricted for the retirement of bonds. SINKING SNIGINK Unscramble SINKING NISNGIK Unscramble 9. Bonds maturing on a single date are referred to as _______ bonds. TERM TEMR Unscramble TERM...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
The owner’s equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor’s...
What is comprehensive income? Definition of Comprehensive Income Comprehensive income for a corporation is the combination of the following amounts which occurred during a specified period of time such as a year,...
in which it is incurred. Hence, interest expense is one of the subtractions from a company’s revenues in calculating a company’s net income. Example of Interest Expense on the Cash Flow Statement Since most...
and reduces a company’s net income. However, the interest paid also causes a change in the company’s balance sheet and statement of cash flows. Reporting Interest Paid on the Statement of Cash Flows In the statement...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
management of their magnitude. Therefore, gross sales can also be defined as the company’s sales revenues before deducting the sales returns, sales allowances, and sales discounts. (The amount remaining after these...
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...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
Are sales discounts reported as an expense? Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
, revenue is the amount earned from customers and clients before subtracting the company’s expenses. Revenue vs Net Income While revenue is the top line on a company’s income statement, net income is often referred...
capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
of the sale, service, or date of the sales invoice. Example of 2/10 Assume that a company is in an industry with credit terms of net 30 days. This means the amount owed by the customer is due within 30 days of the...
What is the gross margin ratio? Definition of Gross Margin Ratio The gross margin ratio is a percentage resulting from dividing the amount of a company’s gross profit by the amount of its net sales. (The gross margin...
as __________ products. 5. A product that emerges from a common process but its total sales value is insignificant is known as a __________ – __________. 6. Net __________ value is the estimated sales value in the...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
How does revenue affect the balance sheet? Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts receivable) and an increase in the...
margin Return on assets Return on stockholders’ equity The inventory turnover ratio will be greater when LIFO is used during periods of increasing costs. The reason is that the cost of goods sold will be higher and...
is recorded in its general ledger account entitled Accounts Receivable. The unpaid balance in this account is reported as part of the current assets listed on the company’s balance sheet. When goods are sold on...
as current assets until they become an expense. Examples of Deferred Expenses Assume that a company pays $3,000 on December 30 to rent a warehouse for the upcoming three-month period of January 1 through March 31. Since...
an organization’s assets. 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...
comprehensive income. Some of these items involve currency translation, hedging, and pensions. Balance sheet. This statement of financial position reports a corporation’s assets, liabilities and stockholders’ equity...
as of the date of the balance sheet, minus 2) the principal payments that are reported as a current liability The lender’s balance sheet will report a current assets for the principal amounts to be received within one...
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
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