. Others use the term debt to mean only the formal, written loans and bonds payable. Examples of Debt As an example of debt meaning the total amount of a company’s liabilities, we look to the debt-to-equity ratio. In...
. Others use the term debt to mean only the formal, written loans and bonds payable. Examples of Debt As an example of debt meaning the total amount of a company’s liabilities, we look to the debt-to-equity ratio. In...
of Public Accounting Services The services provided by public accounting firms vary by the size and the expertise of the firm. Here are some of the public accounting services: Preparation, review, and auditing of the...
on the company’s balance sheet as follows: $188,000 as a long-term or noncurrent liability such as noncurrent portion of mortgage loan $12,000 as a current liability such as current portion of mortgage loan When the...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
. Basically, the bank reconciliation compares the amounts in a company’s accounting records with the amounts in its bank’s records. Any differences are reconciled (explained) so that improper amounts will be exposed...
that it leases from the owner (lessor). The lease states that all improvements to the building will belong to the owner of the building. If the walls and offices cost $90,000 and are expected to be useful for 15 years,...
costs. In turn, management can take action to correct the problems, seek higher selling prices, etc. Since the company’s external financial statements must reflect the historical cost principle, the standard costs in...
and development for the future leaders of the company. A disadvantage of decentralization occurs if a subunit makes a decision that is good for the subunit’s financial results, but it results in less than optimal...
, but will not recognize the variety of activities and efforts that occur with different products. The traditional method may have been reasonable or at least sufficient for the company’s external financial statements...
. On the other hand, some companies are required by government regulations to end their accounting years on December 31, even though it is not the end of their natural business year. The term fiscal year is associated...
contingent liabilities and their related contingent losses are: Recorded with a journal entry Are limited to a disclosure in the notes to the financial statements Not recorded or disclosed We have another Q&A that...
to maturity) is the interest rate that will discount the interest stream (an ordinary annuity) and the maturity amount (a lump sum) to $287,832. This can be done with software, a financial calculator, or via trial and...
is more subjective and could lead to some exaggerated amounts. Outside of the financial statements amounts, companies could get estimated current or replacement values from appraisers. Join PRO to Track Progress Mark...
. for a total of $2,460 Note that the $60 difference was recorded as Vacation Expense in the year of the payment. The financial statements of the prior year were not restated for the $5 monthly differences. The reason is...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
, a corporation could instead debit a related account entitled Dividends (or Cash Dividends Declared). However, at the end of the accounting year, the balance in the Dividends account will be closed by transferring its...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
of details, but still has the correct balance for preparing the company’s financial statements. Example of Control Accounts A common example of a control account is the general ledger account entitled Accounts...
accounting amounts to see how the investments will impact its future Internal rate of return Net present value The discounting of cash flows can be done using computer software, financial calculators, or present value...
accounts. The amounts and balances in the general ledger accounts are used to prepare the company’s financial statements. Example of General Journal and General Ledger Assume that a company depreciates its equipment...
leveraged. Every balance sheet that is distributed by a company should include notes (or footnote disclosures). These notes provide important additional information concerning the company’s financial position...
should normally be reported at its net realizable value. (U.S. income tax rules require conformity between tax and financial reporting. As a result, there are complexities involved.) Join PRO to Track Progress Mark the...
$100 check and will be accountable for the $100. At all times the custodian must have a combination of cash and petty cash vouchers/receipts which add up to $100. This is referred to as an imprest petty cash fund....
accounts, but with differing amounts. Recurring journal entries may also be referred to as memorized journal entries or standard journal entries. Examples of Recurring Journal Entries A company that prepares monthly...
What is a post-closing trial balance? Definition of Post-closing Trial Balance A post-closing trial balance is a trial balance which is prepared after all of the temporary accounts in the general ledger have been closed....
to be employed at a larger company and will be able to delegate the processing of the high-volume routine transactions to accounting clerks. In turn, the accountant will deal with more complicated transactions, will...
-30 days past due, 31-60 days past due, etc. A receivable that is current (not past due) is usually not a problem. However, when customers are past due it is a sign that they are experiencing some financial difficulties....
in the __________ ledger. 3. A sole proprietor’s withdrawal of cash for personal use is recorded in the account Salaries Expense. Select... True False 4. Bad Debts Expense is an income statement account used to report...
a company’s financial statements. adjusting entry This type of journal entry is used to accrue or defer amounts prior to preparing a company’s financial statements. Mark as wrong Mark as right closing entries These...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Reconciling the bank statement is a procedure that can improve a company’s internal...
The third major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The first section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
A classification on a single-step income statement for both operating and nonoperating expenses and losses that pertain to the time interval shown in the heading of the income statement.
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