’ equity are reduced with the debit to Depreciation Expense The carrying value of the assets being depreciated and amount of total assets are reduced by the credit to Accumulated Depreciation The depreciation expense...
’ equity are reduced with the debit to Depreciation Expense The carrying value of the assets being depreciated and amount of total assets are reduced by the credit to Accumulated Depreciation The depreciation expense...
of its goods to the buyer and in return has a current asset known as accounts receivable. One consequence is the seller becomes one of the buyer’s unsecured creditors. This means that the seller has the risk of bad...
future cash inflows of $100,000 at the end of each year for 10 years. The future cash receipts of $100,000 at the end of each year for 10 years needs to be discounted to their present value. If the future cash amounts...
the customer. If the check was sent in error, I would photocopy the check, document on the photocopy what had occurred, and then return it to the customer. If you did not notice the double payment when processing the...
Depreciation (Explanation). 1. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Wrong. The amount on the...
are likely to be paid a __________ instead of an hourly rate of pay. 4. The usual rate (net of state credits) for federal unemployment tax is__________% on the first $__________ of each employee’s annual wages. 5. A...
are not due within one year of the balance sheet date are reported as a long-term liability. Select... interest principal interest and principal 19. The two main components of stockholders’ equity are paid-in capital...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Current assets minus current liabilities is __________ capital. 2. The time it takes for a retailer’s...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
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...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
Under this method a company records detailed transactions and reports its net income by summarizing and reporting these detailed transactions. (A different approach is called the capital maintenance approach which...
The contra owner’s equity account that reports the amount of withdrawals of business cash or other assets by the owner for personal use during the current accounting year. At the end of the accounting year, the...
A detailed plan with dollar amounts. Examples of budgets used in business include the cash budget, sales budget, production budget, department budgets, the master budget, and the capital expenditures budget. Some budgets...
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
involves the “timing” of when the cost of an asset will appear as depreciation expense on a company’s financial statements versus the depreciation expense on the company’s income tax return. Hence, the...
in the retained earnings, which is part of stockholders’ equity. A net loss will cause a decrease in retained earnings and stockholders’ equity. A sole proprietorship’s net income will cause an increase in the...
approach is also referred to as the capital maintenance approach. Under the balance sheet approach one looks at the change in stockholders’ or owner’s equity to determine the amount of net income during the period...
What is a stockholder? Definition of Stockholder A stockholder (also known as a shareholder) is the owner of one or more shares of a corporation’s capital stock. A stockholder is considered to be separate from the...
it indicates that the company has paid more than the amount owed, has made an incorrect entry, etc.) Equity accounts including the stockholders’ equity accounts Common Stock, Paid-in Capital in Excess of Par Value,...
Retained Earnings and to increase the corporation’s Paid-in Capital. Therefore, the total amount of stockholders’ equity and the total amount of assets are unchanged. Occasionally, a corporation will distribute...
rolling budget for capital expenditures. In this case a full year will be added to replace the year that has just ended. This 5-year rolling budget means that management will always have a forward looking 5-year capital...
will include vehicle loans, bonds payable, capital lease obligations, pension and other post-retirement benefit obligations, and deferred income taxes. Some long-term debt that will be due within one year can continue...
Capital expenditures (which is a separate item reported under cash flows from investing activities) Example of Free Cash Flow Assume that during the most recent year a corporation had cash flows from operating...
will be refinanced by issuing new bonds, another long-term liability, or by issuing shares of stock. It appears the focus is on the company’s working capital (current assets minus current liabilities). If the company...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
How do you record an owner's money that is used to start a company? Recording Money to Start a Sole Proprietorship If Amy Ott begins a sole proprietorship by putting money into her business, the sole proprietorship...
statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
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....
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...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
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...
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