that are not reported on the corporation’s income statement. Treasury stock. This is a reduction of stockholders’ equity for the amount the corporation paid to purchase but not retire its own shares of capital...
that are not reported on the corporation’s income statement. Treasury stock. This is a reduction of stockholders’ equity for the amount the corporation paid to purchase but not retire its own shares of capital...
What is an expense? Definition of Expense Under the accrual method of accounting, an expense is a cost that is reported on the income statement for the period in which: The cost best matches the related revenues The cost...
, average) for removing the costs from inventory and sending them to the cost of goods sold. Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that have been sold to customers during the...
What are some examples of financing activities? Definition of Financing Activities Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement...
in the owner’s capital account and owner’s equity. 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...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
that were provided. This is done with a debit to the liability account Gift Certificates Outstanding and a credit to a revenue account. Our explanation pertains to financial accounting. To learn about the income tax...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
for each month. However, the controller expects the actual depreciation to be only $44,000 for the year. For the first eleven months, the financial statements will report $44,000 of depreciation expense. Then in the...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
What is going concern? Definition of Going Concern The going concern assumption is a basic underlying assumption of accounting. For a company to be a going concern, it must be able to continue operating long enough to...
associated with plant assets. The use of the word reserve led some readers of the financial statements to conclude that money was set aside for replacing plant assets or the uncollectible accounts or loans. To avoid...
What is the meaning of arrears? In accounting we use the word arrears in at least two ways. One use involves the omitted dividends on cumulative preferred stock. For example, if a corporation has cumulative preferred...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
to this landlord. Both parties use the accrual method of accounting and issue monthly financial statements. The rent is $2,000 per month and it is due on the first day of each month. If the rent is paid when due, the...
How do you record the interest that is unpaid on a note payable? Definition of Interest Unpaid on Note Payable Interest that has occurred, but has not been paid as of a balance sheet date, is referred to as accrued...
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
What is ERP? Definition of ERP In accounting, ERP is the acronym for enterprise resource planning. ERP could be described as a database software package that supports all of a business’s processes and operations...
of working capital during the year was $400,000. Therefore, its working capital turnover ratio was: net sales of $2,400,000 divided by average working capital of $400,000 = 6 times during the year. As with most...
maturity dates. Stocks pay dividends, which are a distribution of the corporation’s profits to its owners. However, the dividend occurs only if the corporation’s board of directors declare the dividend. The dividend...
and/or the small business owner. The qualifications of a bookkeeper include business sense, attention to detail, speed, accuracy, ability to adapt to changes in technology, understanding of debits and credits, and...
a profitable division that no longer meets its long range goals. The proceeds from this disinvestment are then used to improve the company’s financial position by reducing its debt. Join PRO to Track Progress Mark the...
of the remaining 85% would be counted every month. Cycle counting reduces the need for the costly process of shutting down the manufacturing process in order to count inventory. Cycle counting can also result in more...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
be broken down to be: [Sales divided by Assets Employed] times [Operating Income before taxes and interest divided by Sales] = Operating Income divided by Assets Employed = ROCE. Take our Financial Ratios Exam. Join...
What are manufacturing costs? Definition of Manufacturing Costs Manufacturing costs are the costs of materials plus the costs to convert the materials into products. All manufacturing costs must be assigned to the units...
to record the loss. By recording the potential loss, you will be reporting less profit and less asset amounts. If there is a potential loss, but it is impossible to measure the amount for a journal entry, there needs to...
. income tax regulations allow a business to use accelerated depreciation on its income tax return while using straight-line depreciation on its financial statements. For profitable corporations, this likely results in...
(as reported on the balance sheet) that is owed to creditors. The larger the debt ratio the greater is the company’s financial leverage. The appropriate debt ratio depends on the industry and factors that are unique...
are completed, their cost will be moved from the WIP account into the Finished Goods Inventory account. The cost of a manufacturer’s work-in-process inventory are to be disclosed in the company’s financial...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
Journal entries usually dated the last day of the accounting period to bring the balance sheet and income statement up to date on the accrual basis of accounting. Adjusting entries are made to report (1) revenues that...
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...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
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...
What are sundry expenses? Definition of Sundry Expenses In accounting and bookkeeping, sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company...
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
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...
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