Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
), a profitable corporation will use accelerated depreciation expense (150% declining balance, 200% declining balance, sum of the years' digits, etc.) on its U.S. income tax return. This is allowed even though the...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
plan, a deferred profit sharing plan, and/or a charitable giving plan may require an expense of 25% of its pretax profits. In addition, a U.S. corporation might have a combined federal and state income tax rate of...
depreciation expense is recorded. When an asset is disposed of (sold, retired, scrapped) the credit balance in Accumulated Depreciation is reduced when the asset’s credit balance is removed by debiting Accumulated...
issue costs to Interest Expense over the remaining life of the bonds. (Bonds are likely to mature 10 years or more after they are issued.) The most precise way to amortize these amounts is to use the effective interest...
income. However, there are two noteworthy differences: The income statement of the sole proprietorship does not report as an expense any salary or wages for the owner working in the business. However, the regular...
. The entry to write off the bad account under the direct write-off method is: Debit Bad Debts Expense (to report the amount of the loss on the company’s income statement) Credit Accounts Receivable (to remove the...
of accounting. Examples of Adjusting Entries The following are hypothetical examples of adjusting entries: Each day the company incurs wages expense for its hourly-paid employees. However, the payroll that includes the...
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...
include this type of account. EXPENSE PENESXE Unscramble EXPENSE EXPEENS Unscramble 7. A common adjusting entry pertaining to plant assets is the recording of ______________. DEPRECIATION ODAPNTIERIEC Unscramble...
for calling on customers. For this service, New Corp agrees to pay commissions of 5% of sales with payment made 10 days after the month ends. Assuming that December’s sales are $100,000 New Corp will be incurring...
the reasons why a company can have an accounting net loss but have a positive net cash inflow. Example of Net Loss But a Positive Cash Flow A common adjustment to a company’s accrual accounting net income or net loss...
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...
in Allowance for Doubtful Accounts reduces the amount reported on a company’s balance sheet for accounts receivable to the amount that is expected to be collected. The balance sheet account Allowance for Doubtful...
Is depreciation a temporary account? Definition of Depreciation Accounts There are two types of general ledger accounts in which depreciation is recorded: Depreciation Expense which is a temporary account since it is an...
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
. As the amount of prepaid insurance expires, the expired portion is moved from the current asset account Prepaid Insurance to the income statement account Insurance Expense. This is usually done at the end of each...
be an increase to the net profit. If the business is a regular corporation, net profit may mean after income tax expense. Example of Net Profit Assume that a sole proprietorship business had the following information...
that the balance sheet reports the net amount that is expected to be collected. The credit balance in the Allowance account is associated with the income statement account Bad Debts Expense. In other words, when a...
Why isn't the direct write off method of uncollectible accounts receivable the preferred method? Definition of Direct Write Off Method Under the direct write off method of accounting for credit losses pertaining to...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
What is a revenue expenditure? Definition of Revenue Expenditure A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place. Revenue expenditures are often discussed...
that the company’s balance sheet will report the net realizable value of $194,800. If the balance in the Allowance account was $0, the company will write an adjusting entry to: Debit the income statement account such...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
of cash flows. Let’s use the following amounts to illustrate this situation. A company’s income statement for a recent year reported revenues of $2,000,000 and expenses of $2,075,000 for a net loss of $75,000. The...
sheet account that is reported under the heading of Property, Plant and Equipment. The asset’s cost (except for the cost of land) will then be allocated to depreciation expense over the useful life of the asset. The...
adjusting entry that debits Vacation Expense for $200 (10 hours X $20 per hour) and credits Vacation Liability for $200. As a result, the balance in the balance sheet account Vacation Liability at December 31 is $2,400...
deducting the cost of goods sold and all other expenses including income tax expense. The calculation is: Net Income after Tax divided by Net Sales. The profit margin ratio is most useful when it is compared to 1) the...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
of the amount of the accounts receivable that will be turning to cash, since some customers may not pay the full amount owed to the company. The credit balance in the allowance account is an estimate amount in an...
, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
, the company’s asset Cash is decreased and its asset Prepaid Insurance is increased. Each month, one-sixth of the premium is recorded as Insurance Expense and the balance in Prepaid Insurance is reduced. When an...
invoices. MATCH MCTAH Unscramble MATCH CMATH Unscramble 4. Vendor invoices for repairs and maintenance are likely debited to this type of account. EXPENSE EPXSNEE Unscramble EXPENSE XENEEPS Unscramble 5. This type of...
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For the past 52 years, Harold Averkamp (CPA, MBA) has
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