, 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...
, 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...
cost or fixed expense. Fixed expenses such as depreciation expense and property insurance expense are reported on a company’s income statement. Understanding which costs are fixed and which are variable is important...
on the income statement as Bad Debts Expense or Uncollectible Accounts Expense. Examples of Recording Bad Debts There are two methods for recording the bad debts associated with accounts receivable: Direct write-off...
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
refer to the allowance account as Allowance for Uncollectible Expense, Allowance for Bad Debts or Provision for Bad Debts. The related income statement account could have the title of Uncollectible Accounts Expense,...
as follows: Credit to its Land account for its cost of $200,000 Debit to its Cash account for the $500,000 it received Credit to the income statement account Gain on Sale of Real Estate for $300,000 Join PRO to Track...
statement will present an accurate picture of December’s profits and the balance sheet will report the liability for the wages owed as of December 31. Join PRO to Track Progress Mark the Question as Read Must-Watch...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
of an asset’s cost that has been moved to the income statement in the form of depreciation expense since the asset was acquired. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
on a multiple-step income statement prior to deducting selling, general and administrative expenses and prior to nonoperating revenues, nonoperating expenses, gains and losses. Example of Gross Profit Let’s assume...
What journal entries are prepared in a bank reconciliation? Definition of Journal Entries in a Bank Reconciliation Journal entries are required in a bank reconciliation when there are adjustments to the balance per...
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...
How do you reduce the break-even point? Definition of Break-even Point The break-even point is the number of units or amount of revenues needed for the company’s income statement to report zero net income or zero net...
. On January 31, the company pays the invoice and debits Accounts Payable and credits Cash for $300. The January 31 payment affected two balance sheet accounts. No expense or other income statement account was affected....
but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense Credit Wages Payable or credit Accrued Wages Payable Wages...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
An unfavorable budget variance (e.g. an actual expense is more than the budgeted amount, or actual revenues are less than the budgeted amount) An amount that is being subtracted The meaning of a negative amount in a...
.), the amount received is not recorded as a sale. (Instead, the company will report this transaction on its income statement as a gain or loss on the disposal of an asset.) Example of Sales The amounts recorded at the...
capital account) increases. Accountants do prepare an income statement or P&L to report the revenues and expenses, but the ultimate effect of a positive amount of profit or net income is to increase the business’s...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
on their statement of activities according to the following functions: Each of its major programs Management and general Fund-raising Membership development In addition, not-for-profit organizations report their...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
corporation can be computed using the before tax earnings and/or the after tax earnings. Example of Return on Assets Ratio Assume that during its most recent year, a company’s income statement reported net income...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
statement of cash flows. 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 operating income is shown. As a result, the income statement allows for an easy comparison of the operations and profitability of companies regardless of their debt and interest expense. Join PRO to Track Progress...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
Can you help me to understand credit memo and debit memo in the bank reconciliation? Definition of Bank Credit Memo A bank credit memo is an item on a company’s bank account statement that increases a company’s...
of the page. 1. ABC Co.’s bank statement indicates that its checking account was credited when one of ABC’s customers transferred $500 into ABC’s checking account. How will this be recorded by ABC Co. in its...
The independent organization based in the UK which develops the International Financial Reporting Standards (IFRS). The IASB has been working with the Financial Accounting Standards Board (FASB), which is based in the...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...
The one-year period ending at an organization’s typical low point of activity. For example, a school’s natural business year is July 1 through June 30. It is practical to have the accounting and financial...
The annual report to the Securities and Exchange Commission (SEC), a U.S. government agency. The Form 10-K must be filed by corporations whose stock is publicly-traded on a U.S. stock exchange. The report contains the...
, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The calculation is presented as a schedule or statement....
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
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