Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
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...
corporations. (The alternative is the direct method, which is actually preferred by the Financial Accounting Standards Board or FASB.) Under the indirect method the first section of the SCF (which is the cash flows from...
credit terms will be indicated on the sales invoice. For example, the seller may have terms of “Net 30 days” or “Due upon receipt.” The term Net means net sales which is the amount of the sales invoice minus any...
ratio is current assets DIVIDED BY current liabilities. Working capital is current assets MINUS current liabilities. Net Worth Wrong. This answer is incorrect. Working Capital Right! This is the correct answer. 3....
and $900,000 is credited to a contributed capital account such as Common Stock. Assume that two days later the corporation purchases real estate consisting of land and a warehouse/office building for $700,000....
purchases a lower costing material in order to achieve a favorable materials price variance. If these materials have some negative qualities, it may lead to an unfavorable materials usage variance. If the materials’...
What is a bookkeeper? Definition of Bookkeeper A bookkeeper is usually employed by a small to mid-size company (or other organization) to process and record the large volume of transactions involving sales, purchases,...
depreciation can be used on the tax returns at the same time that straight-line depreciation is used on the company’s financial statements. Example of How and When to Depreciate an Asset Assume that a U.S. corporation...
of a cost to the accounting periods in which the cost is used up. Hence, if a company purchases an elaborate office system for $252,000 that will be useful for 84 months, the company should report $3,000 of depreciation...
be recorded in the company’s Purchases account. Select... True False 18. A separate account for meals expense is helpful since business meals are expensed in full on the financial statements but may or may not be...
A term that is sometimes used interchangeably with gross profit. Others use the term to mean the percentage of gross profit dollars divided by net sales dollars.
Dollars of gross profit divided by the dollars of net sales. Also known as gross margin.
A net debit balance for the total amount of owner’s equity. It is the result of the reported amount of liabilities exceeding the reported amount of assets.
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
In accounting this term means a company’s net income, which is the bottom line of the income statement.
A company’s income statement which reports each item as a percentage of net sales.
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
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.
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
A corporation’s reported net income and earnings per share for a three-month period.
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
The result of the sale of an asset for less than its carrying amount; the write-down of assets; the net result of expenses exceeding revenues.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
This financial statistic is the net income of a corporation after income tax (less any preferred dividends) divided by the weighted average number of shares of common stock outstanding during the same period of time.
An action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
An income statement that has more than one subtraction in arriving at net income. An income statement showing gross profit is an indication it is a multiple-step income statement.
A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...
The rate that will discount all cash flows to a net present value of zero.
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
Net sales revenues minus the cost of goods sold.
This loss is not an extraordinary item, since it is not unusual in nature. However, it can appear as a separate line item in the main portion of the income statement. It will be reported at its gross amount (not net of...
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
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