to record the loss. By recording the potential loss, you will be reporting less profit and less asset amounts. If there is a potential loss, but it is impossible to measure the amount for a journal entry, there needs to...
to record the loss. By recording the potential loss, you will be reporting less profit and less asset amounts. If there is a potential loss, but it is impossible to measure the amount for a journal entry, there needs to...
How do you treat voided checks on the bank reconciliation? Definition of Voided Check on Bank Reconciliation If a check was voided in the current month but was written in the previous month and appeared on the previous...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
for $900 in the account Advertising Expenses. Upon review, the advertising manager informs the accountant that the amount should have been recorded in the account Marketing Supplies. If the accountant uses a journal...
. As soon as possible, the amount(s) in the suspense account should be moved to the proper account(s). Example of Using a Suspense Account An accountant was instructed to record a significant number of journal entries...
A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
A term used in break-even analysis to indicate the amount of sales that are above the break-even point. In other words, the margin of safety is the amount by which a company’s sales could decrease before the...
The mathematical result of sales revenues divided by average total assets during the period of the sales.
Comparable amounts from several years are expressed as a percentage of the amount during a base year. For example, sales from each year of 2014 through 2023 are presented as a percentage of the sales during 2014.
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
receivable is critical for a company to pay its obligations when they are due. The calculation of the accounts receivable turnover ratio is: credit sales for a year divided by the company’s average amount of accounts...
What is revenue? Definition of Revenue Revenue is the amount a company receives from selling goods and/or providing services to its customers and clients. A company’s revenue, which is reported on the first line...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
for $100, its gross profit is $20. This results in a gross profit percentage or gross margin ratio of 20% of the selling price. Therefore, when the company has sales of $50,000 it is assumed that its cost of those goods...
in the accounting period in which it expires or is used up. If the future benefit of a cost cannot be determined, it should be charged to expense immediately. Examples of the Matching Principle To illustrate the...
receivable to another party. The sale may be with or without recourse. factoring accounts receivable This occurs when a company sells its accounts receivable to another party. The sale may be with or without recourse....
securities + accounts receivable is divided by the company’s current liabilities. Mark as wrong Mark as right accounts receivable turnover ratio This ratio results when total credit sales for a year are divided by the...
investments, and accounts receivable. (Inventory and prepaid expenses are current assets; however, they are not quick assets.) Quick ratio = $80,000 divided by $100,000 Quick ratio = 0.8 to 1 8. In the past year a...
transferring title to its goods at either: the time the goods are shipped (the terms are FOB shipping point), or the time the goods are delivered to the buyer (the terms are FOB destination) It is at one of these points...
A company’s sales in a market as compared to the total sales in that market. For example, General Motors share of the U.S. market has decreased from more than 50% in the 1960’s to its present market share of...
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
The average balance in the account Accounts Receivable during a period of time. Since the amount reported in the Accounts Receivable account is the ending balance on one specific day, it is necessary to compute an...
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
Advertising Expense. The accounts for revenues are almost always credited. When a bakery sells its products, it credits Sales. When a bank earns interest on its loans, it credits Loan Interest Revenues. When a company...
What is a fixed expense? Definition of Fixed Expense A fixed expense is an expense whose total amount does not change when there is an increase in an activity such as sales or production. The words within a relevant or...
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...
memo with a debit to Sales Allowances and a credit to Accounts Receivable. The supplier will combine the debit balance in its Sales Allowances account with the credit balance in its Sales account to arrive at its net...
What is the difference between gross margin and markup? Definition of Gross Margin Gross margin or gross profit is defined as net sales minus the cost of goods sold. However, some people intend for the term gross margin...
What is the gross margin ratio? Definition of Gross Margin Ratio The gross margin ratio is a percentage resulting from dividing the amount of a company’s gross profit by the amount of its net sales. (The gross margin...
and providers offering a cash discount will refer to it as a sales discount, while the buyer will refer to the same discount as a purchase discount. Examples of a Cash Discount Let’s assume that a company offers a...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
. The second subtotal is the amount of operating income. Example of a Multiple-Step Income Statement Here is an example of a condensed multiple-step income statement for a hypothetical sole proprietorship: Notice these...
What does 2/10 mean in accounting? Definition of 2/10 2/10 is part of an early payment discount that allows a customer or client to pay after the sale or service has been provided. This sales discount...
What is a credit memo? Definition of Credit Memo One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. Another type of credit memo, or...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
from creditors (and the remaining 27% came from stockholders). 6. JamCorp’s income statement for its most recent year reported the following: Net sales $500,000 Cost of goods sold $350,000 Selling and admin expenses...
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