Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
A reduction in the original selling price.
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...
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...
is a term commonly used to describe a company selling parts of its business for cash, selling its assets in order to pay debts, or the process of winding down or closing a business. Join PRO to Track Progress Mark the...
a gross profit ratio of 20% will have a mark-up ratio that is __________% of its cost of goods. 14. Selling, general and administrative (SG&A) expenses account for the difference between __________ profit and...
decreases. Examples of Variable Expenses Assume that a website business sells a product and requires the customer to pay with a credit card. The credit card processor charges the business a fee of 3% of each amount...
The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company’s bonds payable. Bond interest expense also includes the amortization of the...
The allocation to expense of the cost of an intangible asset such as a patent or goodwill.
See Bad Debts Expense.
The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
The amount of temporary staffing costs that were used during the time interval indicated in the heading of the income statement.
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
Is a loan payment an expense? Definition of Loan Payment Generally a loan payment consists of: An interest payment, which is an expense A principal payment, which reduces the loan’s principal balance If the interest...
An expense account which is expected to have a credit balance instead of the typical debit balance.
The income statement account which contains a portion of the cost of equipment that is being expensed during the time interval shown in the heading of the income statement.
The amount of rent that has been incurred by a tenant during an accounting period shown in the heading of the income statement, but it has not been paid as of the last day of the accounting period.
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
An income statement account for expense items that are too insignificant to have their own separate general ledger accounts.
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
What is miscellaneous expense? Definition of Miscellaneous Expense In accounting, miscellaneous expense may refer to a general ledger account in which small, infrequent transaction amounts are recorded. The account...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
Under the accrual method of accounting, the account Salaries Expense reports the salaries that employees have earned during the period indicated in the heading of the income statement, whether or not the company has yet...
This is an operating expense resulting from making sales on credit and not collecting the customers’ entire accounts receivable balances.
This account shows the amount of delivery expense incurred (occurring) during the accounting period shown in the heading of the income statement. The title of this account could also be Freight Out or Transportation...
Is advertising an asset or an expense? Definition of Advertising Expense Advertising is the amount a company incurs to promote its products, brands, and image via television, radio, magazines, Internet, etc. Since the...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
Under the accrual basis of accounting this income statement account reports the amount of commissions expense that pertains to the revenues earned by the company during the accounting period shown in the heading of the...
What is interest expense? Definition of Interest Expense Interest expense is the cost of borrowing money during a specified period of time. Interest expense is occurring daily, but the interest is likely to be paid...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
Under the accrual basis of accounting, this account reports the cost of the temporary help services that a company used during the period indicated on its income statement.
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
The compensation earned by hourly-paid employees during the interval of time indicated in the heading of the income statement. Under the accrual basis of accounting, the date that wages are paid does not determine when...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
A selling expense account shown on the income statement in order to match this expense to the related sales.
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
at an extremely high volume or low volume, a change will likely occur. Examples of Fixed Expenses Let’s assume that a retailer’s monthly rent is $2,000. If the rent will remain at $2,000 whether the monthly sales...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s pension plan during the period indicated in the heading on the income statement. Information on pensions...
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