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...
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...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
obligations and include deferred revenues. Mark as wrong Mark as right owner's equity This is the difference between the amount of a proprietorship’s assets and liabilities. It consists of the owner’s capital...
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.
inventory such as the cost of capital, space, insurance, 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...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Current assets are usually presented on the balance sheet in order of __________. 2. Working capital is...
by reading our Debits and Credits (Explanation) and Additional Explanation. Use the following information for questions 1 and 2: A company receives $500 of cash as an additional investment in the company by its owner,...
on the right side or credit side. 10. What is the normal balance for the owner’s equity account entitled R. Smith, Capital? Select... Debit balance Credit balance View Coaching The owner's equity account R....
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...
How do I calculate the after-tax cost of debt? Definition of After-Tax Cost of Debt The after-tax cost of debt is the interest paid on the debt minus the income tax savings as the result of deducting the interest expense...
, and the bank credits its liability account Customer Deposit Accounts. The liability is appropriate since the bank has the obligation to return the customer’s money on demand). The bank’s liability is reduced when...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
tax are found on the corporation’s income tax return. (The corporation’s taxable income is based on the income tax laws and regulations of the various governments.) The accounting and financial reporting of a...
%. Examples of Net Present Value Assume that an investment of $5,000 today will result in one cash receipt of $10,000 at the end of 5 years. If the investor requires a 10% annual return compounded annually, the net...
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...
What is the effective interest rate? Definition of Effective Interest Rate The effective interest rate is the true rate of interest earned. It can also mean the market interest rate, the yield to maturity, the discount...
. The check being returned as not sufficient funds is also referred to as a returned check, a bank return item, a check that bounced, or a rubber check since it was bounced back to the payee by the bank on which the...
such as Deferred Revenue, Deferred Income, Unearned Revenue The credit to the liability account is made because the company has not yet earned the money and the company has an obligation to deliver the goods or services...
regulations specify the useful life that must be used for income tax reporting. This is one reason that in a given year the depreciation on a company’s income tax return will not agree with the depreciation reported...
statements should be based on a formula that is: Logical Consistently applied Objective and acceptable to another unbiased accountant The depreciation expense reported on a company’s financial statements is usually...
, each customer’s remittance, return of merchandise, discounts, and so on. With these details in the subsidiary ledger, the Accounts Receivable account in the general ledger can report summary amounts for the accounts...
ratio, here are some additional accounting/financial ratios: Quick ratio Debt to equity ratio Accounts receivable turnover ratio Days’ sales in inventory Interest coverage ratio Gross margin ratio Return on...
by the bank.) Company X then has the obligation or liability to repay the bank for the courtesy extended to Company X. 2. If Company X’s bank does not pay the checks because the account has insufficient funds, the...
statements, the petty cash custodian should request cash for the petty cash receipts, which should be the amount to return the cash amount back to $100. This is known as replenishing the petty cash fund. Join PRO to...
or LIFO, but require the same cost flow assumption be used on both the company’s tax return and on the company’s financial statements. With inflation being the norm, profitable companies using LIFO are matching the...
, sheltered) because the loss was also deductible on the company’s income tax return. net income. Revenues and gains minus expenses and losses. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
that a sales invoice is for $1,000 and the buyer has been authorized to return $100 of goods. Therefore, the net amount due to the seller within 30 days is $900. However, the buyer may deduct $9 (1% of $900) if the...
to provide the goods or services to the customer or to return the money. Hence, the current liability account Customer Deposits is credited. When the company earns the deposit amount, the current liability will be...
in the goods, etc. In the case of a purchase allowance, the buyer does not return the merchandise to the supplier. Example of a Purchase Allowance A retailer ordered 10 items at a cost of $15 each from one of its...
efficient equipment or to retain its existing equipment. Net incremental cash flows are necessary for calculating an investment’s: net present value internal rate of return payback period To illustrate net incremental...
. Smith, Capital will be __________ for $1,000. Select... debited credited 25. Nearly all balance sheet accounts are __________ accounts. Select... permanent temporary 26. Income statement accounts are __________...
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 Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
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...
of comprehensive income Statement of cash flows Statement of stockholders’ equity The balance sheet must present the amounts at the final moment of the most recent 2 years. 2. Which of the annual financial statements...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
of capital expenditures. (Sometimes the dividends paid are also subtracted.) free cash flow This is the remainder of 1) net cash flows from operating activities, minus 2) the required amount of capital expenditures....
arrangement that assures that the long-term debt will be replaced with new long-term debt or with capital stock. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
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