The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
Advertising Expense is the income statement account which reports the dollar amount of ads run during the period shown in the income statement. Advertising Expense will be reported under selling expenses on the income...
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.
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 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...
. 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!...
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 Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
Comprehensive income consists of the following two components (which are reported on the statement of comprehensive income): Net income (or loss) from the income statement, and Other comprehensive income (some...
on the bank statement. OUTSTANDING NUSAOTNGTID Unscramble OUTSTANDING GTDUNNASOIT Unscramble 2. Deposits made but not yet appearing on the bank statement are deposits in __________. TRANSIT TANTSIR Unscramble TRANSIT...
What is revenue? Definition of Revenue Revenue is the amount a company receives from selling goods and/or providing services to its customers and clients. A company’s revenue, which is reported on the first line...
to be $15,000. As a result, its balance sheet will report inventory of $15,000 and its income statement will report cost of goods sold of $85,000 ($100,000 – $15,000). During January the company purchased $130,000 of...
. In this situation, the inventory should be reported on the balance sheet at $12,000, and the income statement should report a loss of $3,000 due to the write-down of inventory. Join PRO to Track Progress Mark 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...
method of accounting. 15. Which financial statements are affected in the year 2023? Balance Sheet Only Wrong. Try another answer. Income Statement Only Wrong. Try another answer. Balance Sheet & Income Statement...
capital uses amounts from which of the following financial statements? Select... Balance sheet only Cash flow statement only Income statement only Both the balance sheet and the income statement 3. For most companies...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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.
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
with accrual adjusting entries by the borrower and the lender before issuing their financial statements. The borrower’s adjusting entry will debit Interest Expense and credit Accrued Interest Payable (a current...
to cash in 10 to 40 days. However, inventory may require several months to be sold and the money collected. Hence, inventory is not considered to be a “quick asset.” To assist in evaluating a company’s liquidity,...
. Examples of Journal Entries Even with computerized accounting systems some general journal entries are necessary. Common general journal entries are the adjusting entries. For example, prior to issuing the company’s...
Website Services Corp (WSC) completed extensive and unique services for a client and agreed to a single payment of $100,000 to be made two years from now. The client’s financial condition would require it to pay...
the debtor pays the amount owed. A lien on a company’s assets should be disclosed in the company’s notes to the financial statements. Examples of Liens The following are examples of liens: A bank lends a retailer...
principle by later increasing the inventory to an amount that is greater than those earlier actual costs. One place that you might find part of the difference between the LIFO cost reported on the balance sheet and its...
Expenses and debits Subscription Expense for the amount that is expiring. Example of Recording a Yearly Subscription Assume that a company pays $1,200 on March 20 for a one-year subscription for a business newsletter...
the Purchase Price Variance Before a company’s financial statements are issued, the balance in the Materials Purchase Price Variance account must be reclassified or allocated to the following: raw materials inventory,...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
What is double-entry bookkeeping? Definition of Double-Entry Bookkeeping Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least...
for both the payee and for the person writing the check. A check returned as not sufficient funds could be an indication that the financial condition of the maker of the check may be suspect. Example of Not Sufficient...
usually accept a fixed cash dividend that will be paid by the corporation before the common stockholders are paid a dividend. In exchange for this preferential treatment of dividends, the preferred stockholders...
the December 31 financial statements: The tenant will debit Rent Expense for $1,000 and will credit Rent Payable for $1,000 The landlord will debit Rent Receivable for $1,000 and will credit Rent Revenues for $1,000...
are paying interest. However, our agreement did not specify any interest, nor did it state an interest rate. To find the interest rate that is implicit in this arrangement, you need to carry out what’s known as a...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
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