Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
What is the difference between the accounts rent receivable and rent revenue? Definition of Rent Receivable Rent Receivable is the title of the balance sheet asset account which indicates the amount of rent that has been...
When calculating inventory turnover, do you use sales or the cost of goods sold? I calculate the inventory turnover by using the cost of goods sold. I use the cost of goods sold because inventory is in the general ledger...
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...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
by reading our Adjusting Entries (Explanation). 1. What type of entry will increase the normal balance of the general ledger account Service Revenues? Debit Wrong. Credit Right! Since revenues cause stockholders'...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
+ Revenues – Expenses – Dividends – Treasury Stock. The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2)...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
owned by a company that have future value which can be measured. assets These are the resources owned by a company that have future value which can be measured. Mark as wrong Mark as right liabilities These are a...
of the present and future situation. It is also wise to consider the financial ratios to be averages. For example, the sales are unlikely to have occurred evenly throughout the year. Therefore, the resulting number of...
Used in conjunction with cost or expense behavior. Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s...
What does the term organic growth mean? Organic growth often refers to the growth in a company’s sales that did not occur because of an acquisition of another company. Expressed another way, organic growth is...
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...
Prepaid Expense for $1,000. Example of Deferral Adjusting Entry for Revenues On December 31, a maintenance service company received $12,000 and agreed to provide the client with maintenance on its equipment for the next...
years all expressed in easier to absorb amounts. Example of Trend Analysis Assume you want to see the trend of a service company’s revenues, net income, and number of clients during the years 2017 through 2023. With...
How can a company have a profit but not have cash? Definition of Profit Under the accrual basis of accounting, profit is the amount of revenues earned minus the amount of expenses incurred. Note that revenues are not...
of the sale, the company can experience a temporary or even permanent cash flow problem. In order for the company to minimize these potential problems, a company is wise to routinely review an aging of accounts...
when: Actual sales are greater than budgeted sales Actual operating expenses are less than budgeted operating expenses Budget variances should be analyzed to identify the reasons for the differences between the actual...
What causes an increase in break-even point? Definition of Break-even Point The break-even point is the sales volume or sales revenue that is needed to cover the company’s expenses. In other words, it is the point...
is currently experiencing. For example, if a retailer buys its merchandise for $0.70 and sells the merchandise for $1.00, it has a gross profit of $0.30. The gross profit of $0.30 divided by the selling price of $1.00...
is driven by the __________ budget. 3. A company’s profit plan or __________ budget includes all of the operating and financial budgets. 4. A budget that will increase when volume increases is referred to as a...
is available at www.FASB.org. assets liabilities equity revenues expenses gains losses comprehensive income 21. Net assets. Select... assets liabilities equity revenues expenses gains losses comprehensive income 22....
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...
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.
A journal entry with more than the minimum of one debit and one credit. Example: a debit to Cash of $500 and a credit to Sales of $475 and a credit to Sales Tax Payable of $25.
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.
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...
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 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...
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...
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...
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...
of the page. 1. Which of the following accounting methods will result in a better matching of expenses with revenues and will provide a better indication of a company’s financial position? Select... Accrual method...
departments such as IT and accounting Definition of a Profit Center A profit center is a subunit of a company that is responsible for revenues and costs. If a division of a company has responsibility for revenues,...
Journal entries usually dated the last day of the accounting period to bring the balance sheet and income statement up to date on the accrual basis of accounting. Adjusting entries are made to report (1) revenues that...
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