An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
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...
stockholder or preferred shareholder. Stockholders may receive dividends based on the number of shares of stock they own. Stockholders also hope to see the market value of their shares of stock increase. In short, there...
, unsold items in inventory. If the same items have been sitting in inventory for years, there are potential accounting issues. For example, the value of the items may be less than their costs due to obsolescence or...
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...
of inventory should include all costs necessary to acquire the items and to get them ready for sale. When inventory items are acquired or produced at varying costs, the company will need to make an assumption on how to...
by smaller depreciation expense and greater taxable income in the later years of the asset’s life. Therefore, a corporation with consistent taxable income will be able to defer some income taxes until the later years...
and patents are examples of __________ assets. 10. The cost of equipment used in a business minus its accumulated depreciation is the equipment’s __________ value or carrying value. 11. The main purpose of...
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 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.
value. gain This type of account is credited when a plant asset is sold for more than its book value. Mark as wrong Mark as right loss This type of account is debited when a plant asset is sold for less than its book...
, plant and equipment for a cash amount that is less than the carrying amount (or book value) of the asset sold. Nonoperating expenses and losses are often reported on the income statement after the subtotal Income from...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
value has been impaired.) 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...
of semiannual interest payments that are part of a bond payable is an example of an ordinary annuity. A 10-year bond with a face value of $10 million and a stated interest rate of 6% will include an ordinary annuity...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
amount (or the book value) of the asset sold. An example would be a retailer’s disposal of a delivery truck for a cash amount that is greater than the truck’s carrying amount. Another example is a gain from a...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
, but we expect to have the item in stock within 5 working days.” A recently organized, regular U.S. corporation will be issuing 100,000 new shares of stock for $100 per share. All of the shares being issued are common...
’ equity are reduced with the debit to Depreciation Expense The carrying value of the assets being depreciated and amount of total assets are reduced by the credit to Accumulated Depreciation The depreciation expense...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
be combined, such as raw materials and supplies, or raw materials and work-in-process. In addition, a manufacturer (and others with inventory) should disclose the method for valuing the inventory. This includes whether...
about a gain, then you do report the gain. For example, if a company sells its old delivery truck for cash and the amount received is greater than the truck’s book value, there is no uncertainty and a gain is...
than $1,000,000. The difference between the $1,000,000 of face value and the amount the bond market is willing to pay is the discount on bonds payable. The amount of the discount is a function of 1) the number of years...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
not be considered to be the fair market value of the business. 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...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
on the income statement over the asset’s useful life. Accountants point out that depreciation is an allocation process which does not result in reporting the asset’s market value. Example of Recording Depreciation...
as a long-term asset. Noncurrent assets are reported under the following balance sheet headings: Investments (long-term) Property, plant and equipment Intangible assets Other assets Examples of Noncurrent Assets...
of the preferred stock agreement requiring it to pay the $9 per share dividend. In turn, the stockholders will be deprived of receiving the $9 dividend in a 7% market. The call price has the effect of limiting how high...
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account....
, to reduce rent, etc. To satisfy stockholders who prefer appreciation in the value of the corporation’s common stock instead of receiving cash dividends that require current income tax payments Join PRO to Track...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
Featured Review
"In my current role as Director of Operations in the financial services industry, I've found immense value in being a PRO user on AccountingCoach. The materials provided are crafted by Harold Averkamp, a seasoned CPA with over 25 years of teaching experience, ensuring unparalleled clarity and relevance. The core materials offer a strong foundation, and the PRO materials elevate the learning experience with comprehensive resources, including video training, quizzes, and Certificates of Achievement. The convenience of 24/7 access and self-directed, self-paced learning fits seamlessly into my schedule, providing invaluable insights that have directly contributed to my success. AccountingCoach has truly become my go-to platform for advancing my accounting knowledge." - Ronnie K.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: