What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
How do you reduce the break-even point? Definition of Break-even Point The break-even point is the number of units or amount of revenues needed for the company’s income statement to report zero net income or zero net...
issued its Statement No. 151, which discusses the reporting of the fixed production overhead when less than normal capacity is utilized. The FASB’s Statements of Financial Accounting Standards are available at no cost...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
What is meant by reconciling an account? Definition of Reconciling an Account Reconciling an account is likely to mean proving or documenting that an account balance is correct. Examples of Reconciling an Account When a...
.), the amount received is not recorded as a sale. (Instead, the company will report this transaction on its income statement as a gain or loss on the disposal of an asset.) Example of Sales The amounts recorded at the...
cost or fixed expense. Fixed expenses such as depreciation expense and property insurance expense are reported on a company’s income statement. Understanding which costs are fixed and which are variable is important...
to as an outstanding check. In the bank reconciliation process an uncleared cheque (or outstanding check) is deducted from the balance shown on the bank statement to arrive at the correct or adjusted balance per bank....
, is now on the bank statement, but it is not in the cash account. Therefore, you need to put the check amount into the general ledger. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
of an asset’s cost that has been moved to the income statement in the form of depreciation expense since the asset was acquired. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
to be certain that: The current month’s insurance expense of $1,000 ($6,000/6 months) is reported on each month’s income statement. The unexpired amount of the prepaid insurance is reported on the balance sheet...
on the corporation’s income statement), plus Other comprehensive income (if any) Examples of other comprehensive income include: Unrealized gains/losses on hedging derivatives Foreign currency translation...
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
amount due for the sales invoice and might even show a negative amount due from the customer. If your company mails statements to its customers, the customer should be able to see its double payment when reviewing the...
as follows: Credit to its Land account for its cost of $200,000 Debit to its Cash account for the $500,000 it received Credit to the income statement account Gain on Sale of Real Estate for $300,000 Join PRO to Track...
. The combination of all the budgets is referred to as the company’s master budget or profit plan. Budgets help management decide which activities it will undertake and how the company’s resources will be used. If...
corporation can be computed using the before tax earnings and/or the after tax earnings. Example of Return on Assets Ratio Assume that during its most recent year, a company’s income statement reported net income...
A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...
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...
of the accounting department and are often distributed outside of the company. The balance sheet summarizes and reports the balances from the asset, liability, and stockholders’ equity accounts that are contained in...
capital account) increases. Accountants do prepare an income statement or P&L to report the revenues and expenses, but the ultimate effect of a positive amount of profit or net income is to increase the business’s...
statement as the cost of goods sold. 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 Refresh your...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
. For example, if the current income statement shows the cost of goods sold as 86% instead of the normal 81%, the current month’s amounts should be investigated before releasing the financial statements. Join PRO to...
of common stock outstanding. This $600,000 distribution of cash will reduce the balances in two of the corporation’s balance sheet accounts: The current asset account Cash is reduced by $600,000 The stockholders’...
What are turnover ratios? Definition of Turnover Ratios In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by an average asset amount for the same year....
What is an adjusted trial balance? Definition of an Adjusted Trial Balance The adjusted trial balance is an internal document that lists the general ledger account titles and their balances after any adjustments have...
with the principal balance in the lender’s records. This can be confirmed on a loan statement from the lender or by asking the lender for the principal balance. Join PRO to Track Progress Mark the Question as Read...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
refer to the allowance account as Allowance for Uncollectible Expense, Allowance for Bad Debts or Provision for Bad Debts. The related income statement account could have the title of Uncollectible Accounts Expense,...
on the income statement as Bad Debts Expense or Uncollectible Accounts Expense. Examples of Recording Bad Debts There are two methods for recording the bad debts associated with accounts receivable: Direct write-off...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
a company’s financial statements. adjusting entry This type of journal entry is used to accrue or defer amounts prior to preparing a company’s financial statements. Mark as wrong Mark as right closing entries These...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
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...
Depreciation (Explanation). 1. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Wrong. The amount on the...
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