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 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...
(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...
, the company will not have to liquidate or be forced out of business. If there is uncertainty as to a company’s ability to meet the going concern assumption, the facts and conditions must be disclosed in its financial...
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...
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...
. to utilize an outside accountant to assist in the preparation of the annual financial statements and tax reports. The outside accountant may also serve as a business advisor when needed. Some outside accountants are...
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...
. 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...
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...
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...
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 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...
at a cost of $500,000. It is expected that the equipment will have no salvage value at the end of an estimated useful life of 10 years. For its financial statements the corporation will usually charge the same amount...
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...
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...
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...
underlying guidelines. The extensive generally accepted accounting principles (US GAAP) are found in the authoritative source known as the Financial Accounting Standards Board Accounting Standards Codification. Join PRO...
, it is wise for a company to use some debt to control a larger amount of profitable assets. However, too much debt can mean significant risk when business conditions decline. Leverage is also known as trading on equity....
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...
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...
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...
that are needed for the external financial statements which must comply with US GAAP. Other topics involve analyses and reports that are not distributed outside of the company but are used by management in its decision...
. On the company’s financial statements dated December 31, the company will need to report the interest expense and liability for December 11 through 31. This is done with an accrual adjusting entry dated December 31....
in arrears also requires a disclosure in the notes to the financial statements. Arrears is also used in the context of annuities. When an annuity’s equal payments occur at the end of each period, the annuity is said...
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...
accounts. (However, there could be an entry into the company’s computer system for scheduling the work or shipment, etc.) Reasons for No Accounting Entry When an Order is Received The following is the rationale for no...
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...
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...
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.
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
are considered to be operating expenses and are presented on the income statement as SG&A expenses. (SG&A is the acronym for selling, general and administrative expenses.) Sales commissions are not part of the...
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...
adjustments when reconciling the bank statement. For example, if a check is written in December but is voided in January, the Cash account in the company’s general ledger will need to be increased when the check is...
Which date is used to record a credit card transaction? When a business uses its credit card, the transaction date is the date the credit card is used, not the date that the credit card statement is paid. For example, if...
Is the depreciation of delivery trucks a period cost or is it manufacturing overhead? The depreciation on the trucks used to deliver products to customers is a period cost. The depreciation on delivery trucks will be...
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