of carriage outwards should be reported on the income statement as an operating expense in the same period as the revenue from the sale of the goods. (Carriage outwards is not part of the cost of goods sold.) Example of...
of carriage outwards should be reported on the income statement as an operating expense in the same period as the revenue from the sale of the goods. (Carriage outwards is not part of the cost of goods sold.) Example of...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
invoice is the three-way __________. 14. Which document from a supplier is the better choice for processing and making a payment? Select... Invoice Statement 15. When a company processes a credit memo from one of its...
rate of a bond payable is also known as the face interest rate, nominal interest rate, contractual interest rate, and the coupon interest rate. The stated interest rate multiplied by the bond’s face amount (or par...
of liability insurance coverage: On December 1 the company debits Prepaid Insurance for $2,400 and credits Cash for $2,400 On the last day of December and on the last day of the following 5 months the company needs to...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
suppliers $10,000 and the supplier gives the company a written promissory note to repay the amount in six months along with interest at 8% per year. The company will debit its current asset account Notes Receivable for...
entered as debits must be equal to the amounts entered as credits. Example of a Double-Entry System To illustrate double entry, let’s assume that a company borrows $10,000 from its bank. The company’s Cash account...
What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
Capital The adequacy of a company’s working capital depends on the industry in which it competes, its relationship with its customers and suppliers, and other factors such as the following: The types of current assets...
to the company’s Cash account. However, the debit portion of the payment entry depends on whether the individual credit card purchases had been previously recorded in the company’s general ledger accounts. Example...
% and will mature in 3 years. The cash that the investor will be receiving is $2,500 every six months ($100,000 X 5% X 1/2 year) for 3 years and then $100,000 at the end of 3 years. The bond’s current price is...
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires that...
of interest that will be received every six months for 5 years to its present value and 2) the $100,000 maturity amount that will be received at the end of 5 years. These cash amounts are discounted by the market...
, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
What is interest income? Definition of Interest Income Interest income is the amount of interest earned on investments (that promise to pay interest) and/or compensation for agreeing to receive cash payments from...
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...
statement information will be incorrect: The balance sheet at the end of the current accounting period will report too little inventory. This in turn means the amount of current assets, the amount of total assets, the...
RRAYUSTE Unscramble 11. The company that has paid insurance premiums in advance should report the unexpired cost in the account __________ Insurance. PREPAID PPRDEIA Unscramble PREPAID PRDIEAP Unscramble 12. A small...
in Accounts Payable. Select... Debit Credit 4. The Cash account will have a __________ balance if the amount of cash is negative. Select... debit credit 5. This will increase the balance in a liability account....
. The entry to write off the bad account under the direct write-off method is: Debit Bad Debts Expense (to report the amount of the loss on the company’s income statement) Credit Accounts Receivable (to remove the...
that the objective of the accounting process is to have accurate financial statements. In this case we want an income statement which reports an accurate amount of cost of goods sold, and the resulting gross profit...
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
The systematic allocation of the cost of a natural resource from the balance sheet to the income statement.
The phrase used by FASB Statement 117 that describes the required focus of a nonprofit’s external financial statements. Previously the external financial statements focused on individual funds.
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...
An amount that is expensed immediately. For example, routine repair costs on equipment are revenue expenditures because they are charged directly to an income statement account such as Repairs and Maintenance Expense.
Net sales is the gross amount of Sales minus Sales Returns and Allowances, and Sales Discounts for the time interval indicated on the income statement.
The cost of telephone service that was used during the period shown on the income statement.
The expense incurred during the time interval indicated on the income statement for using rented equipment.
An income statement account showing the amount of vacation expense earned by employees (by working) during the specified accounting period.
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
The amount of rent that has been earned by the landlord or owner during the accounting period shown in the heading of the income statement, but it has not been received as of the last day of the accounting period.
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...
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...
In accounting the qualitative characteristics include relevance, reliability, comparability, and consistency. Qualitative characteristics are discussed in the Financial Accounting Standards Board’s Statement of...
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.
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
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