of the production equipment Salaries and benefits for production supervisors These actual costs will be recorded in general ledger accounts as the costs are incurred. Definition of Applied Overhead Applied overhead is...
of the production equipment Salaries and benefits for production supervisors These actual costs will be recorded in general ledger accounts as the costs are incurred. Definition of Applied Overhead Applied overhead is...
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...
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...
and store the transaction amounts involving revenues and expenses. At any point, the balances in the revenue and expense accounts can be moved to the owner’s equity account. Since revenues cause owner’s equity to...
entitled Petty Cash when the petty cash fund is established. Example of Petty Cash Affecting Expenses Assume that the petty cash money is used to pay postage of $10. While the company incurs this cost at the time of...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
). Examples of Nonoperating Expenses and Losses A common example on a nonoperating expense is the interest expense incurred by a retailer or manufacturer. The retailer’s main operations are purchasing and selling...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
to issuing the financial statements. Example of an Accrued Expense To illustrate an accrued expense, let’s assume that a company borrowed $200,000 on December 1. The agreement requires that the company repay the...
Bookkeeping Video Training Part 8 Adjusting entries: accrued expenses, reversing the accrual of expenses after the accounting period is over Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
of accounting. 9. The income statement is also known as the statement of earnings and the statement of __________. 10. Some refer to the income statement as the profit and __________ statement. 11. Generally, a...
of accounting. 9. The income statement is also known as the statement of earnings and the statement of __________. 10. Some refer to the income statement as the profit and __________ statement. 11. Generally, a...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
account entitled Cash – Checking. Select... debit credit 9. The normal balances for both asset accounts and expense accounts are debit balances. Select... True False 10. If the account Allowance for Doubtful Accounts...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
of an Expense Accrual The accrual of an expense or an expense accrual refers to the reporting of an expense and the related liability in an accounting period that is prior to the period when the amount will be paid or...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
on December 31 for the estimated amount. If the estimated amount is $18,000 the retailer will debit Temp Service Expense for $18,000 and will credit Accrued Expenses Payable for $18,000. This adjusting entry assures...
. (It was $147,000 for 2022.) This means that in the year 2023, only the first $160,200 of an employee’s gross wages, salaries, bonuses, etc. (or self-employed’s business earnings) will be subject to the Social...
is fixed only within a reasonable or relevant range of activity.) Many manufacturing overhead costs are fixed and the amounts occur in large increments. Additional examples include depreciation on a company-owned...
as well as the goods that have been sold will have “absorbed” the fixed manufacturing overhead costs (as well as the costs of variable manufacturing overhead, direct labor, and direct materials). Fixed manufacturing...
. (These are in addition to the other product and production costs of direct materials and direct labor.) Since the fixed manufacturing overhead costs (such as depreciation, salaries of manufacturing personnel, etc.) are...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
What is the difference between Social Security and Medicare payroll taxes? Social Security Payroll Tax The Social Security payroll tax is 6.2% and is based on each employee’s earnings (wages, salaries, bonuses,...
. The Additional Medicare Tax is 0.9% (0.009) of an employee’s gross pay (wages, salaries, bonuses, etc.) that are in excess of $200,000 during a calendar year. The Additional Medicare Tax is in addition to the...
expense and income tax expense divided by its interest expense. The larger the times interest earned ratio, the more likely that the corporation can make its interest payments. The times interest earned ratio is also...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
A term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
of property, plant, and equipment. Depreciation of the Building and Equipment is a Fixed Cost The depreciation expense associated with a company’s buildings and machinery is considered to be a fixed cost or a fixed...
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...
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
Also known as freight-out or as delivery expense. This is an operating expense further classified as a selling expense. It results when merchandise is sold with terms of FOB destination.
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
accounts, which consists of asset, liability, and owner’s (stockholders’) equity accounts Income statement accounts, which consist of revenue, expense, gain, and loss accounts Examples of Accounts Affected by...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
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