What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
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...
of the disposal, the equipment’s accumulated depreciation is $195,000. ABC Company is willing to remove the equipment and pay XYZ $10,000. Since XYZ is not in the business of buying and selling equipment, this sale of...
with a selling price of $12 a unit. SalesMax sends GoodCorp an invoice listing the items, the date shipped of June 15, and payment terms of 2/10, net 30. When GoodCorp receives the 100 units of product, it...
). If replacement cost would have been allowed and used, the gross profit would be $20 (selling price of $165 minus the replacement cost of $145). The amount of phantom or illusory profit was $45 ($65 reported minus $20...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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 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...
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...
consists of all of the revenues, gains, expenses, and losses that caused stockholders’ equity to change during the accounting period. The amount of net income for the period is added to retained earnings, while the...
on the company’s balance sheet. Generally, the asset account balances are debit balances and are increased with a debit entry and decreased with a credit entry. Examples of Asset Accounts Some examples of asset...
in order to report this person as an asset owned by the entity. The salary and bonuses paid to a key employee are reported as expenses in the period in which the employee performed services. Not being able to record a...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
of Adjusting Entries Adjusting entries that will result in a difference between the unadjusted trial balance and the adjusted trial balance include the following: The accrual of expenses that were incurred but were not...
mean an amount that is prior to income tax expense. Some people might use the word earnings to mean an amount before all expenses are considered. Some people use the word profits to mean net income before income tax...
is considered to be a better indicator of a company’s ability to meet its current obligations than the current ratio because inventories and prepaid expenses are not included. Example of Acid Test Ratio Let’s...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The...
they are not expenses. However, dividends on preferred stock will appear on the income statement as a subtraction from net income in order to report the earnings available for common stock. Join PRO to Track Progress...
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...
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...
during the month, but the transactions had not been recorded in the accounts as of the end of the month To record the expenses, losses, and their related liabilities which were incurred during the month, but the...
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...
that depreciation expense will beat its budget by $4,000 ($44,000 of actual depreciation versus the annual budget of $48,000). This favorable $4,000 is the controller’s cushion. The idea is that this will cushion the...
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...
liabilities Other accrued expenses Income taxes payable Again, the order will vary. For example, some companies will list Accounts Payable as the first current liability account. Join PRO to Track Progress Mark the...
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...
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...
of the statement of cash flows. (If an asset other than cash is withdrawn, it is reported as supplemental information on the statement of cash flows.) The income statement is not affected by the owner’s drawings since...
remitted more than the amount needed. During the first few days of the accounting period in which reversing entries are recorded to reverse the accrual adjusting entries for expenses and liabilities of the previous...
cost or fixed expense. Fixed expenses such as depreciation expense and property insurance expense are reported on a company’s income statement. Understanding which costs are fixed and which are variable is important...
Supplies Prepaid expenses Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to...
. FOB shipping point This term indicates that the ownership of goods will transfer to the buyer when the goods leave the seller’s warehouse. Mark as wrong Mark as right accrued expenses These expenses have occurred but...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
. 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...
that reports the company’s revenues and expenses is the __________. Select... balance sheet income statement statement of cash flows 3. The heading of the balance sheet will indicate which of the following? Select......
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...
that usually pays interest semiannually is a __________. 12. Expenses that have occurred but were not yet processed into the accounts payable system are known as __________ expenses. 13. A loan secured by a lien on real...
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 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...
Featured Review
"I have learned so much about accounting by simply studying an hour a day. I did not realize how much fun the PRO Plus program was going to be. I highly urge anyone and everyone in business to try it. I personally have gained so much more knowledge than in my college classes. Thanks to AccountingCoach and their amazing online program!" - Frank G.
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: