Depreciation (Explanation). 1. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Wrong. The amount on the...
Depreciation (Explanation). 1. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Wrong. The amount on the...
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...
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 Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
a contribution margin of $4 per unit (selling price of $10 per unit minus variable expenses of $6 per unit), the company’s break-even point in sales for the year is 75,000 units. Break-even Point in Billable Service...
, companies need to review its staffing in light of current levels of business and the recent advances in software and technology. Perhaps the company can function just fine with a few less salaried employees. Lastly,...
is calculated by dividing the company’s total fixed expenses for the accounting period by the contribution margin per unit. The break-even calculation assumes that the selling prices, contribution margins, and fixed...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
costs. In turn, management can take action to correct the problems, seek higher selling prices, etc. Since the company’s external financial statements must reflect the historical cost principle, the standard costs in...
, capital budgeting for expanding operations, standard costing and the reporting of variances, transfer pricing, etc. Special analyses includes cost behavior, cost-volume-profit relationships, make or buy decisions,...
be allocated to the resulting 90 lots in a meaningful way so that the developer can report the profit of selling two residential lots and the largest of the business lots. The basis for the allocation is likely to be...
of its $10,000 in Accounts Receivable. This example points out the possible risk of selling goods or providing services with credit terms. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
Discount The company selling the product (and the buyer of the product) will record the transaction at the amount after the trade discount is subtracted. For example, when goods with list prices totaling $1,000 are sold...
. The inventory turnover ratios are high because the stores feature the fast selling brands at low prices. Their strategy is that huge sales volumes with small profit margins will still result in adequate net income...
for controlling operations, and estimating selling prices when quoting prices for new work. Other Examples of Accounting Some of the many other examples of accounting include: Advising on accounting systems Income tax...
. In accounting, the learning curve is important for setting standards, estimating costs, and establishing selling prices. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
or from obtaining a bank loan are not revenues Revenues are amounts that companies earned by selling products or providing services. When the cash is received (at the time of the sale or service or at a later date) is...
of Long-term Assets Long-term assets include long-term investments in financial securities, property, plant, equipment, and intangible assets. Definition of Proceeds from Long-term Assets The money a company receives...
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...
. Credit entries appear on the right side of a T-account.] 3. What type of entry will increase the normal balances of the general ledger accounts Electricity Expense, Insurance Expense, Interest Expense, and Repairs...
a debit to Depreciation Expense and a credit to __________ __________. 6. Accumulated depreciation is a contra asset account and therefore will likely have a __________ balance. 7. The depreciation methods that result...
that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset’s life but slower in the later years. However, the total amount of depreciation expense during the...
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...
A liability account with a credit balance associated with bonds payable that were issued at more than the face value or maturity value of the bonds. The premium on bonds payable is amortized to interest expense over the...
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
The systematic allocation of the premium on bonds payable (reported as a credit in a liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize the premium contains a debit to...
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
A contra liability account that reports the amount of unamortized discount associated with bonds that are outstanding. The discount on bonds payable originates when bonds are issued for less than the bond’s face or...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
. If the employee is paying (reimbursing) the company immediately, you can record the entire phone bill with a debit of $100 to the company’s account Telephone Expense. You will also credit Telephone Expense for $20...
expense during the years that the asset is used in the business. Salvage value is also referred to as disposal value, residual value, or scrap value. Example of Asset Salvage Value Perhaps the most common calculation of...
30 for liability insurance for the six months that begins on January 1. For the next two days, none of the $600 will be reported as an expense. Instead, all $600 of cost is being deferred until the new year. Therefore,...
What are some tips to make learning debits and credits easy? Here are five tips to make learning debits and credits easier: The accounts for expenses are nearly always debited. For example, when a company pays its...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
receivable to the amount that is more likely be collected. The income statement account Bad Debts Expense is part of the adjusting entry that increases the balance in the Allowance for Uncollectible Accounts. Effect of...
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