of cash flows when it is prepared under the indirect method. The term amortization is also used to indicate the systematic reduction in a loan balance resulting from a predetermined schedule of interest and principal...
of cash flows when it is prepared under the indirect method. The term amortization is also used to indicate the systematic reduction in a loan balance resulting from a predetermined schedule of interest and principal...
operating activities. Since most companies use the indirect method for the statement of cash flows, the interest expense will be “buried” in the corporation’s net income. Net income will be the first item listed...
If a mortgage payment is due on January 1, should the payment be accrued at December 31? The following answer assumes that the accrual basis of accounting (also known as the accrual method of accounting) is being used…...
to this landlord. Both parties use the accrual method of accounting and issue monthly financial statements. The rent is $2,000 per month and it is due on the first day of each month. If the rent is paid when due, the...
of Liability Accounts Common liability accounts used with the accrual method of accounting include: Accounts Payable Notes Payable or Loans Payable Accrued Liabilities or Accrued Expenses Unearned Revenues or...
for sales returns, sales allowances, and early payment discounts is known as net sales.) Under the accrual basis or accrual method of accounting, goods sold on credit are reported as sales (revenue) when the goods have...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
, etc. Recording a Bill Payable Under the accrual method of accounting or bookkeeping, a bill payable or unpaid vendor invoice is recorded in Accounts Payable with a credit entry. (The debit will likely be recorded as an...
the accrual method of accounting. For instance, the monthly bookkeeping entries for depreciation, property taxes, utilities, fringe benefits and more will need to be estimates. Even the end-of-year financial statements...
. The entry will debit Loan to Employee for $5,000 and will credit Cash for $5,000. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by debiting Interest...
What is the monthly close? Definition of Monthly Close In accounting, monthly close is a series of steps and procedures that are followed so that a company’s monthly financial statements are in compliance with the...
the following costs: direct materials direct labor variable manufacturing overhead fixed manufacturing overhead Absorption costing is required for external financial reporting and for income tax reporting. Another...
the accrual method of accounting. 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...
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...
is credited to this account and then amortized with a credit to interest expense over the life of the bonds. Mark as wrong Mark as right straight-line amortization This is a common method for systematically moving bond...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
than the current cost of the productive capacity being used up each year. Similarly, if a retailer’s cost of items in inventory is increasing at an annual rate of 10%, the cost of goods sold reported on the income...
for the month of June. The weekly statements were not only more timely, they were easier to prepare when it came to inventory and payroll. (When the company had monthly income statements and the month ended on a...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
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 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...
What are accrual adjusting entries? Definition of Accrual Adjusting Entries Accrual adjusting entries or simply accruals are one of three types of adjusting entries which are prepared at the end of an accounting period...
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...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
the asset Cash and will __________. Select... increase another asset reduce owner's equity in 2023 23. Recording revenues when they are earned rather than when the money is received is part of which basis or method...
's __________ interest rate. Market Right! Nominal Wrong. Stated Wrong. 12. Which of the following interest rates is different? Effective Right! Face Wrong. Nominal Wrong. Stated Wrong. 13. Which amortization method...
-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...
. Mark as wrong Mark as right accrual method of accounting (or) accrual basis of accounting This method of accounting reports revenues when they are earned and reports expenses when they occur. accrual method of...
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...
. The allowance account must be a zero or credit balance when reported on the balance sheet. Credit Right! 9. On which financial statement would you expect to find Allowance for Doubtful Accounts? Balance Sheet Right!...
. For example, a small retailer can compare her cost of goods sold (perhaps 78%) to a much larger retailer’s cost of goods sold (perhaps 80%). Similarly, one company’s inventory might be 33% (of total assets) while a...
working capital and the current ratio. Examples of Current Assets Examples of current assets and the typical order of liquidity include: Cash and cash equivalents (which includes currency, checking accounts, petty cash,...
in which the expenses occur. Hence, SG&A expenses are said to be period costs as opposed to being part of a product’s cost. Since SG&A expenses are not a product cost, they are not assigned to the cost of...
. If that amount is significant, the company will prorate the $400,000 to its inventory and to its cost of goods sold. Let’s also assume that the proration will be based on the company’s $1 million of standard...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
: To have cash available for unforeseen events and for increases in its costs To reduce its long-term debt or repurchase shares of its common stock To increase inventory to expand, to purchase in larger quantities for...
on the company’s balance sheet. Generally, the asset account balances are debit balances and are increased with a debit entry and decreased with a credit entry. Examples of Asset Accounts Some examples of asset...
or the owner’s capital account, an expense will also cause one or more of the following changes to the balance sheet: A decrease in Cash, Prepaid Expenses, Supplies on Hand, Inventory An increase in the credit balance...
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