Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
financial statements will report: Income tax expense on its income statement for the revenues and expenses appearing on the accounting period’s income statement, and Income taxes payable (a current liability on the...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
Are sales discounts reported as an expense? Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s 401(k) plan associated with the employees in the warehouse department during the period indicated in the...
How much of the contribution margin is profit on units sold in excess of the break-even point? After the break-even point is reached, the entire contribution margin on the next units sold will be profit…provided the...
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
of a company’s revenues, expenses, gains, losses, and the resulting net income that occurred during a year, quarter, or other period of time. Examples of Items Appearing in the Income Statement The main items reported...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
by reading our Nonmanufacturing Overhead (Explanation). 1. Selling expenses should be allocated to the cost of goods sold for external financial reporting. True Wrong. False Right! 2. According to U.S. accounting...
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...
revenues, etc.) and operating expenses (cost of sales, SG&A expenses) appear first The subtotal Gross profit is the result of subtracting the Cost of sales from the Net sales The subtotal Operating income is the...
in the factory. In addition to the manufacturing costs, there are selling, general and administrative (SG&A) expenses and perhaps interest expense. Generally, accountants do not consider these expenses to be product...
sales, the company is deciding whether to eliminate E. If E is eliminated, the compensation of E’s employees and other expenses directly associated with E (amounting to $400,000) will be eliminated. However, the...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
What is the break-even point? Definition of Break-even Point In accounting, the break-even point refers to the revenues necessary to cover a company’s total amount of fixed and variable expenses during a specified...
by reading our Nonprofit Accounting (Explanation). 1. A nonprofit's revenues and expenses are reported on its statement of __________ activities. 2. The accounting equation of a nonprofit is Assets = Liabilities +...
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined...
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
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.
receivable will be recorded. (Under the cash basis of accounting, revenues are not reported on the income statement until the cash is received.) Also under the accrual basis of accounting, expenses are reported on the...
of the following is defined as net sales minus cost of goods sold? Select... Gross income Gross profit Net income Operating income View Coaching Gross profit = net sales minus cost of goods sold. [Operating income is...
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
+ Owner’s Capital + Revenues – Expenses – Owner’s Draws. The expanded accounting equation for a corporation provides more details for the stockholders’ equity amount shown in the basic accounting equation. The...
If a company earns a profit, which balance sheet items change? Definition of Profit Profit is the result of revenues minus expenses. How Profits Change the Balance Sheet Since all business transactions affect at least...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
will have a problem when it comes to expenses. After all, expenses have debit balances. Since expenses will reduce a company’s profits, they are not good. Lots of people have tried to make debit mean something more...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
Income Statement Income Statement The income statement is also known as the statement of income, statement of operations, statement of earnings, profit and loss statement, and P&L. It reports a corporation’s...
Where are accruals reflected on the balance sheet? Definition of Accruals The accrual of expenses and liabilities refers to expenses and/or liabilities that a company has incurred, but the company has not yet paid...
What is the difference between a cost and an expense? Definitions of Cost and Expense Some people use cost interchangeably with expense. However, we use the term cost to mean the amount spent to purchase an item, a...
reports a company’s revenues, expenses, and most of the gains and losses which occurred during the period of time shown in the statement’s heading. (A few gains and losses are not reported on the profit and loss...
sales. The cost of goods sold will consist of both fixed and variable product costs. However, selling, general and administrative expenses (SG&A) are not part of the cost of goods sold. Definition of Contribution...
, and manufacturing overhead used to manufacture a product. Definition of Period Costs Period costs are expenses that will be reported on the income statement without ever attaching to products. Since they are not...
What is the difference between expense and loss? Definition of Expense An expense is a cost that a company incurs or uses up when it earns revenues. Examples of Expenses A few examples of the many expenses that a company...
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