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...
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...
of a corporation, the equity account is Retained Earnings. In the case of a sole proprietorship, the equity account is the owner’s capital account. As a result, the income statement accounts will begin the next...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
an accounting adjusting entry in which the account Depreciation Expense is debited and the contra asset account Accumulated Depreciation is credited. Effects of Depreciation The following are some of the effects for a...
that are recorded in income statement accounts. This allows the balance sheet account Owner’s Capital (or Retained Earnings) to avoid having all of the thousands or millions of revenue and expense transactions from...
of a proprietorship’s assets and liabilities. It consists of the owner’s capital account and drawing account. Mark as wrong Mark as right stockholders' equity This is the difference between the amount of a...
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.
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
Accounts that have some restrictions. For example, an investment account and a cash account might be restricted for the construction of a new factory. The restrictions mean that these accounts be reported as a long-term...
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...
What is the price earnings ratio? The price earnings ratio, or P/E ratio, is the market price per share of common stock divided by the earnings per share of common stock. A corporation with a high price earnings...
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.
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
position and the for-profit corporation’s balance sheet is the equity section: The for-profit corporation’s equity section has the heading Stockholders’ Equity. Within this section are the paid-in capital amounts...
. If the business is a corporation, the balances will be transferred to the retained earnings account. Since the owner’s drawing account is not an income statement account, its balance will be closed by transferring...
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...
the amount of money currently on hand.) Expense accounts and loss accounts including Cost of Goods Sold, Wages Expense, Rent Expense, Interest Expense, Loss on Disposal of Equipment, Loss from Lawsuit, etc. (The debit...
bonds. The result is that liabilities decrease and stockholders’ equity increases. 3) A corporation declares a cash dividend. A current liability Dividends Payable is created and the Retained Earnings (part of...
of $3 per share, the corporation will distribute $75,000 of its cash to the common stockholders. In addition to reducing the corporation’s cash balance, it reduces the corporation’s retained earnings, which is part...
on the corporation’s preferred and common stock are not tax deductible. The cost of common stock (paid-in capital and retained earnings) is considered to be the most expensive component of the cost of capital because...
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...
as Prepaid Insurance or as part of Prepaid Expenses. Each month an adjusting entry will move $500 from Prepaid Insurance to Insurance Expense to recognize that the insurance coverage has a monthly cost of $500. 13. A...
a corporation’s Retained Earnings account (or a sole owner’s capital account) and will be closed to these balance sheet equity accounts at the end of the accounting year. Join PRO to Track Progress Mark the Question...
accounts (common stock, retained earnings, etc.) 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...
liability accounts including Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits stockholders’ equity accounts such as Common Stock, Retained Earnings, Treasury Stock, and Accumulated...
are closed at the end of the accounting year, the net amount will ultimately end up in a balance sheet equity account such as the proprietor’s capital account or the corporation’s retained earnings account....
, Accumulated Depreciation, Notes Payable, Accounts Payable, Payroll Taxes Payable, Paid-in Capital, Retained Earnings, and others. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
will begin each accounting year with a zero balance and will have its balance at the end of the year closed to an equity account such as a corporation’s retained earnings or a proprietor’s capital account....
accumulated depreciation. It is also the face value of bonds minus its unamortized discount (or plus its unamortized premium). It is also the amount of a corporation’s stockholders’ equity. Mark as wrong Mark as...
What is the difference between revenues and earnings? Definition of Revenues and Earnings Revenues are the amounts earned from providing goods or services to customers during the period shown in the heading of the income...
the corporation first issued the shares of stock. Mark as wrong Mark as right retained earnings This section of stockholders’ equity (and this general ledger account) generally reports the corporation’s cumulative...
Are dividend payments shown as an expense on the income statement? Definition of Dividend Payments The cash dividends paid to stockholders are a distribution of the corporation’s earnings. Dividends are not an expense...
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...
Under accrual accounting an item has been “earned” and is reported as revenue when a service has been performed or the ownership to a product has been transferred from the seller to the buyer (not when cash...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
's statement of other comprehensive income (or in a financial statement that shows both the net income and the other comprehensive income). The following image illustrates: Net income becoming part of retained...
are traded on a stock exchange, the earnings per share must appear on the face of its income statement. Example of Earnings per Share Assume a corporation has only one class of common stock outstanding and has no...
to the corporation’s Retained Earnings account, or to the sole proprietorship’s Owner’s Capital account.) Example of Crediting Sales Recall that asset accounts normally have debit balances and the liability and...
, income taxes paid, and retained earnings will be lower because of the higher cost of goods sold Examples of Effect on Financial Ratios from LIFO Instead of FIFO When there is significantly increasing costs, the...
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