variable expenses which are 10% of sales (mostly commissions expense). The remaining 30% of sales include LAXCO’s fixed expenses and its net income before taxes. If LAXCO has to write off a $5,000 receivable balance...
variable expenses which are 10% of sales (mostly commissions expense). The remaining 30% of sales include LAXCO’s fixed expenses and its net income before taxes. If LAXCO has to write off a $5,000 receivable balance...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
Accounts Receivable & Bad Debts Expense(Quick Test #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
equal to credits, the account balances must satisfy the accounting equation, which is: Assets = Liabilities + Stockholders’ Equity Asset accounts (normally debit balances) include: Cash Accounts receivable Inventory...
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...
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...
earnings by having larger expenses when earnings are larger, and less expenses when earnings are less. (Negative losses may even result in negative income tax expense.) In a year of low earnings, the corporation might...
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...
selling prices reducing advertising expenses increasing advertising expenses closing a facility or outlet adding a facility or outlet many other possibilities Unfortunately, the amounts that are readily available (such...
with a “1”. The first digit of the liability accounts will begin with the digit “2”. Perhaps marketing expenses will begin with the digit “5” and administrative expenses will begin with the digit “6”....
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 Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Financial Accounting introduces some of the basic accounting concepts and how they affect the income statement, balance sheet, and other financial statements.
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...
to the credits. Mark as wrong Mark as right adjusting entry This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a...
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...
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...
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...
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...
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...
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...
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...
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...
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...
inventory. The cost of sales does not include selling, general and administrative (SG&A) expenses, or interest expense. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
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...
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...
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...
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...
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...
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...
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...
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