What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
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.
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...
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...
What is a deferral? Definition of Deferral A deferral often refers to an amount that was paid or received, but the amount cannot be reported on the current income statement since it will be an expense or revenue of a...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
What is accounting for price level changes? In 1979 the Financial Accounting Standards Board (FASB) issued its Statement of Financial Accounting Standards No. 33 entitled Financial Reporting and Changing Prices. (You...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
a company’s cash flow statement (or statement of cash flows). A variation of the above calculation is to also subtract the dividends to stockholders, if the dividends are viewed as a requirement. Example of Free Cash...
Why are some expenses deferred? Definition of Deferred Expenses Under the accrual basis of accounting, an expense is a cost that is used up, has expired, or is directly related to revenues reported on a company’s...
income statement, the company's May 31 balance sheet will report the account receivable as an asset. The balance sheet will be in balance because revenues also cause an increase in retained earnings. 3. Under the...
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...
How can a company with a net loss show a positive cash flow? Definition of Net Loss A net loss occurs when a company’s revenues and gains are less than its operating expenses, other expenses and losses. The net loss or...
the financial statements to be more attractive and easier to read especially when the amounts for each of two or three years must be shown. Example of Rounding Amounts on Financial Statements Imagine looking at a...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
to prepare its external financial statements. Example of Materials Usage Variance Even though a company uses a standard cost system in its accounting, the company’s external financial statements must comply with the...
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 first 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 first major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
This is the classification shown on a single-step income statement which reports the operating revenues, nonoperating revenues, and gains in one section of the income statement. Revenues and gains enhance the...
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.
Statement of Cash Flows. See Explanation of Cash Flow Statement.
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
A phrase used in reconciling the bank statement. It refers to the ending balance shown on the bank statement.
Under the accrual basis of accounting this income statement account reports the amount of commissions expense that pertains to the revenues earned by the company during the accounting period shown in the heading of the...
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The third major 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...
Our income statement shows wide fluctuations in utilities expense from month to month. I suspect our accounting is not proper. Any suggestions? Under accrual accounting, your income statement should report the amount for...
on October 1st are referred to as deposits __________ in transit as of September 30. 3. A general guide for reconciling the bank statement is "Put the item where it __________ isn't". For items 4-15,...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
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...
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...
What is the difference between vertical analysis and horizontal analysis? Definition of Vertical Analysis Vertical analysis expresses each amount on a financial statement as a percentage of another amount. The vertical...
__________. Select... bank books 5. Money received and already recorded in the general ledger Cash account, but not appearing as a deposit on the bank statement will be reported on the bank reconciliation as a deposit...
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