and gain accounts such as Sales Revenues, Service Revenues, Interest Revenues, Gain on Disposal of Equipment, Gain from Lawsuit, and many others Contra-asset accounts including Allowance for Doubtful Accounts and...
and gain accounts such as Sales Revenues, Service Revenues, Interest Revenues, Gain on Disposal of Equipment, Gain from Lawsuit, and many others Contra-asset accounts including Allowance for Doubtful Accounts and...
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...
Assume that a corporation had the following amounts for the most recent year: Net income after tax of $500,000 Interest expense of $200,000 Income tax expense of $300,000 Given these assumptions, the corporation’s...
of the general ledger income statement accounts that had debit balances Next, if the Income Summary has a credit balance, the amount is the company’s net income. The Income Summary will be closed with a debit for that...
What is a provision for discounts allowable? The provision for discounts allowable is likely to be a balance sheet account that serves to reduce the asset account Accounts Receivable. The provision account’s counter...
and providers offering a cash discount will refer to it as a sales discount, while the buyer will refer to the same discount as a purchase discount. Examples of a Cash Discount Let’s assume that a company offers a...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
an annualized interest rate of 18% (1.5% per month multiplied times 12 months). A vendor’s invoice having an early payment discount of “1/10, net 30” means that 1% can be saved if the amount owed is remitted...
is reported as a _________ asset. CURRENT RRUCNET Unscramble CURRENT TCENURR Unscramble 2. Inventory is often reported at the _______ of cost or net realizable value. LOWER ORWEL Unscramble LOWER LEORW Unscramble 3....
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
: Less profit Less asset amount Greater liability amount The conservatism guideline does not direct the accountant to be super conservative and beat down a company’s profits. The accountant is to be fair and objective....
on credit and offers an early payment discount expressed as 1/10, net 30. This means that a customer is allowed to deduct 1% of the invoice amount, if payment is made within 10 days (instead of paying the full...
method, the interest expense will be included in the company’s net income or net earnings. The interest expense is adjusted to a cash amount through the changes to the working capital amounts, which are also reported...
of the statement of cash flows usually begins with a company’s net income and then immediately adds the period’s depreciation expense. In effect the noncash depreciation expense is added back because the...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
of Purchase Discount Assume that a company receives a supplier’s invoice of $5,000 with the credit terms 2/10 net 30. The company will be allowed to subtract a purchase discount of $100 (2% of $5,000) and remit...
What is the earnings per share (EPS) ratio? Definition of Earnings per Share The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s 1) net income (or earnings) after tax that is...
as a reduction in the company’s Cash account and an increase in an asset account such as Advance to Employees or Other Receivables: Advances. (If the amount is expected to be repaid within one year, this account will...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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 Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
, as well as its gross profit, net income, income tax payments, and more.) FIFO. This results in the oldest, lower costs as the first to flow out of inventory and becoming the cost of goods sold LIFO. This results in the...
to approving a vendor’s invoice for payment, the invoice, receiving report, and __________ order should be compared. 3. A supplier’s invoice for $1,000 is received on June 1 and has terms of 1/10, net 30. If...
because the adjusting entry was omitted? Select... Asset Liability Stockholders' equity 15. A corporation issued its balance sheet without an accrual adjusting entry for the interest it had earned on an investment...
Inventory Prepaid Expenses Investments Land Buildings Furniture and Fixtures Vehicles, and more Generally, asset accounts will have debit balances and their account balances will be increased with a debit entry....
amounts of revenues, expenses, gains, losses, assets, liabilities, and stockholders’ equity. Common Characteristic of Adjusting Entries Every adjusting entry will involve: At least one balance sheet account, and At...
-of-the-years’-digits (SYD) method of depreciation. The company acquires an asset and estimates it will have a useful life of 8 years and a salvage value of $0. What percent of the asset’s cost will be reported as...
of completing a sale or service. They are reported as a liability until they become earned. Mark as wrong Mark as right depreciation This is the systematic allocation of a plant asset’s cost to expense over the...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
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...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
. If a manufacturer sells merchandise to a retailer with terms of net 30 days, the manufacturer is the creditor and retailer is the debtor. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay the...
for the newly issued shares of its capital stock. Paid-in capital is also referred to as contributed capital and as permanent capital. Definition of Retained Earnings Generally, retained earnings is the cumulative...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
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...
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