from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
, there will be an occasional 53-week year) School districts typically have fiscal years of July 1 through June 30 to coincide with its natural business year. Large retailers often end their fiscal years on the Saturday...
discount as a sales discount. The buyer may refer to the early payment discount as a purchases discount.) Not all companies offer early payment discounts. If the discount is allowed it will appear on the sales invoice....
season is finished, the merchandise returns from holiday sales are completed, and the January clearance sales have taken place. [The 52-53 week periods with 13-week quarters allows for better comparisons than calendar...
can be converted to cash much faster than inventory. The nature of the company’s sales and how customers pay. If a company has very consistent sales via the Internet and its customers pay with credit cards at the time...
of goods sold ($225,000 instead of $215,000). The formula for the gross profit is: Net sales – cost of goods sold = gross profit. If net sales for 2023 were $300,000, the gross profit will be incorrectly reported as...
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...
13. An assembly line. Select... Cost center Revenue center Profit center Investment center 14. Responsible for return on capital employed. Select... Cost center Revenue center Profit center Investment center 15. Not...
How do the income statements of a sole proprietorship and a regular corporation differ? Definition of Income Statements of Sole Proprietorship and Regular Corporation The income statement of a sole proprietorship and a...
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 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 Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
about this topic by reading our Accounts Receivable and Bad Debts Expense (Explanation). 1. When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ discount period. 2....
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
in the heading of the income statement. The estimated amount of Bad Debts Expense could be based on: A percentage of the company’s credit sales during the period, or The change in the total amount needed in the...
the direct write-off method or the allowance method. Examples of the Write-off of a Bad Account Under the direct write-off method a company writes off a bad account receivable when a specific account is determined to be...
is a contra-asset account. 6. Sales and services that are provided on credit will cause an increase in the asset account __________ __________. 7. Accounts Payable, Wages Payable, and Notes Payable are examples of...
delivery van, this transaction is outside of the retailer’s main business activities of purchasing and selling merchandise. Therefore, the sale of the van will not be included with the sales of merchandise. Instead, a...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
a huge backlog of orders for the product. Every hour that the machine is running, your company is able to generate sales of $500 while incurring incremental costs and expenses of $200. As a result, your company’s...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
, the money is counted and is deposited into the church’s bank account. The transaction to record the cash and the revenues (remember double entry) should be dated Sunday, June 4, since that is the day of the...
for one of its customers. Periodicity allows the manufacturer to divide the manufacturing costs of the machine into the 24 monthly periods covered by the contract. Periodicity also allows the manufacturer to report the...
of Liability Accounts Common liability accounts used with the accrual method of accounting include: Accounts Payable Notes Payable or Loans Payable Accrued Liabilities or Accrued Expenses Unearned Revenues or...
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
to the joint products at the split-off point. When the byproducts are sold, the amount received is reported as revenues. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
on the total organization (as opposed to focusing on specific funds within the organization) and reports the following: Revenues such as contributions, program fees, membership dues, grants, investment income, and...
other comprehensive income is not considered.) A corporation’s EBIT could be the same as its operating income. However, if the corporation has nonoperating revenues and/or gains and/or certain losses, the...
within one year The principal portion of a long-term loan that must be paid within one year Wages payable Income taxes payable Interest payable Other accrued expenses payable Deferred revenues and customer deposits Join...
Why are accruals needed every month? Reasons for Monthly Accruals Accrual adjusting entries are needed monthly only if a company issues monthly financial statements. Two reasons for the monthly accrual adjusting entries...
will be matched with the $60,000 of increased electricity revenues it will be reporting on its five annual income statements. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
a new sole proprietorship business. At this point, the owner’s equity is a positive $100,000. During the first year of operations, the business’s expenses exceeded revenues by $108,000 and there were no draws or...
What is a plant asset? What is a Plant Asset A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant assets are also known as fixed...
Featured Review
"I am thankful I signed up for AccountingCoach. My background is in front-office customer service and minor bookkeeping. My husband and I opened a satellite office for a European company where I had to use all those skills and more. We have an ERP system and an accountant, but I needed to brush up on some of my bookkeeping and learn new skills to keep up with my accountant. I have recently started with AccountingCoach, and I can tell you that it is user friendly and easy to navigate. You can go in order or jump to a section as needed. Everything is clearly explained. The PRO platform is great because you have access to all the material whenever you need it, so if I have any future questions, I can go back and look at it. I would highly recommend this website to others." - Susan H.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: