. 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...
. 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...
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...
accounts. The aging lists every customer’s balance and then sorts each customer’s balance according to the amount of time since the sale(s) occurred. The most recent sales are assumed to be fully collectible, but...
. In the calculation of the return on assets, the numerator is __________ __________. Select... gross profit net income net sales 14. The times interest earned ratio refers to a company’s interest __________. Select......
and expenses. break-even point This is the number of units or the revenues needed by a company in order to cover both its 1) fixed costs and expenses, and 2) variable costs and expenses. Mark as wrong Mark as right cost...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
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...
. Examples of an Invoice The seller refers to the invoice it prepares as a sales invoice. The purchaser of the goods or services will refer to the seller’s sales invoice that it receives as a vendor invoice or purchase...
Financial statements that reflect the total economic entity. For example, on a consolidated income statement a corporation having several subsidiaries would report the total of all of its companies’ sales that were...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
... Accounts payable Accounts receivable Cash Inventory 6. Which of the following will result in an increase in the quick ratio? Select... Collection of an account receivable Sales of products on credit 7. Which of the...
to be removed from inventory and matched with the sales revenues reported on the income statement. This means that the oldest costs remain in inventory. LIFO became popular due to inflation and the fact the U.S. income...
that the company’s inventory had been sold. The goal is to have an inventory turnover ratio as large as possible without losing sales and/or customers. Example and Limitations of the Inventory Turnover Ratio As...
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...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Sales minus variable costs equals the __________ margin. 2. The sales in excess of the amount of sales...
of goods sold is more logical than using sales when computing a company's ______ sales in inventory. DAYS ASYD Unscramble DAYS YDAS Unscramble 8. A company's average ____________ period is calculated by...
to as common or __________ costs. 3. A frequent decision at the point where two or more products emerge from a common process is whether to 1) sell the products at that point, or 2) to __________ them further. 4. The...
What is safety stock? Definition of Safety Stock Safety stock is an additional quantity of an item held by a company in inventory in order to reduce the risk that the item will be out of stock. Safety stock acts as a...
Instead of LIFO If a U.S. corporation’s cost of inventory items are continuously increasing and the corporation has been experiencing operating losses and negative taxable income, the use of FIFO means matching its...
prices in order to determine whether the quantity of inventory has increased or decreased. Base year is also the initial year in a series of annual amounts. For instance, an accountant might prepare a chart that...
be sold without a sales effort. Until that effort is made and an item is actually sold, the company cannot report the $10 increase from $40 to $50. This is referred to as the revenue recognition principle. In other...
revenue that had been prepaid by a customer, the company’s balance sheet’s liability deferred revenue will decrease and retained earnings will increase. Examples of the Effect of Revenue on the Balance Sheet...
What is the difference between gross profit margin and gross margin? Definition of Gross Profit Gross profit is an amount that is computed as follows: A company’s net Sales minus its cost of goods sold A product’s...
between a company’s revenues and some of its expenses, these expenses should appear on the same income statement as the associated revenues. Accountants describe this as matching expenses with revenues. For instance,...
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
What is turnover? Definition of Turnover In accounting, the term turnover can have more than one meaning. In some countries turnover is used in place of sales. Turnover also pertains to certain financial ratios that...
has specified the number of years that various assets will be useful and it assumes there will be no salvage value. The IRS also allows a company’s tax return to deduct larger amounts of depreciation in the earlier...
See sales discounts.
Net income divided by net sales.
The acronym for cost of sales or for the cost of services.
Financial Statements Video Training Part 10 Income statement: formats (multiple-step, single-step, comparative, amounts as % of net sales) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
in which the expenses occur. Hence, SG&A expenses are said to be period costs as opposed to being part of a product’s cost. Since SG&A expenses are not a product cost, they are not assigned to the cost of...
What are credit terms? Definition of Credit Terms Credit terms indicate when payment is due for a company’s sales invoice (which the customer will refer to as a purchase invoice). The credit terms also indicate whether...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
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