Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
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...
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 Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
, an asset, was increased in August. Service Revenue Wrong. The account to be debited is Accounts Receivable. The account Service Revenue should be CREDITED in August. It is very rare that any revenue account would be...
and subtracting of these adjustments should result in the Adjusted (or Corrected) Balance per Bank. Adjustments to the Balance per Books Again, the tip for listing the adjustments is: “Put it where it isn’t.” For...
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 Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
is fully depreciated, the depreciation expense stops, even if the asset continues to be used in the business. Useful Life An asset’s useful life is the estimated number of years (or units of output) that the asset...
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 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 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...
, let’s assume that: The bank statement shows a bank service charge of $25, but the company’s general ledger does not The $2,000 deposit made by the company on June 30 is not shown on the bank statement One of the...
bank statements. For example, Have the bank service charges been entered in the Cash account? Have the electronic transfers been entered? If not, you will need to make those entries. You may have to go back to earlier...
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...
to an annual percentage rate closest to __________. 2% Wrong. 24% Wrong. 36% Right! [(20 days early and 2%) both x 18 = 360 days and 36%] 72% Wrong. 15. The Internal Revenue Service form to be issued for amounts paid to...
... bank books 25. A company’s bank statement shows a balance of $1,234 on December 31. The company’s general ledger shows a balance of $658. The bank statement reports a service charge of $14. The amount of...
account balance. Examples of Bank Debit Memo in a Bank Reconciliation Some examples of bank debit memos include: Bank service charge for maintaining the checking account A subtraction for a customer’s check that did...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
will be to debit Interest Receivable for $1,000 and to credit Interest Income for $1,000. 16. On December 10, a company received $20,000 from a customer as an advance for work that the company will begin in January. On...
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...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
What is the difference between unearned revenue and unrecorded revenue? Definition of Unearned Revenue In financial accounting, unearned revenue refers to money received prior to being earned. It is also referred to as...
What are accrued revenues and when are they recorded? Definition of Accrued Revenues Accrued revenues include service revenues, interest income, sales of goods, etc. which have been earned by a business, but the...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
that are reported on the statement of cash flows in the section entitled cash flows from investing activities. When the equipment is placed into service, the company will begin to report depreciation expense on the...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
+ $10,000 of owner’s equity. Next, let’s assume the new company completes a service for another business and earns revenues of $1,500 and allows the business to pay in 10 days. This means the new company will have...
and gain accounts such as Sales Revenues, Service Revenues, Interest Revenues, Gain on Disposal of Equipment, Gain from Lawsuit, and many others Contra-asset accounts including Allowance for Doubtful Accounts and...
withholdings Examples of payments that will be expenses in a future accounting period(s): Payments for construction of a building that will be put into service next year Payments for an exhibit at next year’s trade...
roots in manufacturing businesses. However, today it extends to service businesses. For example, a bank will use cost accounting to determine the cost of processing a customer’s check and/or a deposit,...
, and/or Planned amounts that will be spent for future additions to property, plant and equipment When the depreciable assets that are included in capex are put into service, their costs will be depreciated over the...
built up within a company as a result of delivering amazing customer service, unique management, teamwork, etc. However, this goodwill is unrelated to a business combination and cannot be recorded or reported on the...
. The second subtotal is the amount of operating income. Example of a Multiple-Step Income Statement Here is an example of a condensed multiple-step income statement for a hypothetical sole proprietorship: Notice these...
What is a compilation? Definition of Compilation A compilation refers to a company’s financial statements that have been prepared or compiled by an outside accountant. A compilation is usually part of an accounting...
the accounting period.] The amount that the employer reports to the Internal Revenue Service on employee’s Form W-2 Wage and Tax Statement is the amount of the gross wages that were paid to the employee during the...
What is public accounting? Definition of Public Accounting Public accounting can be viewed as firms of accountants that serve clients such as businesses (retailers, manufacturers, service companies, etc.), individuals,...
a $9,100 increase in cash (receipts of $10,000 minus payments of $900). Now assume that a different company had a profit of $60,000 in its first year, but paid out $65,000 near the end of the year to acquire equipment...
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