A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
The amount that a recurring equal amount deposited at the beginning of each period will grow to under compounded interest. An annuity due is also known as an annuity in advance.
What is a/c? Definition of a/c In accounting, a/c is the abbreviation for account. Example of a/c An accountant might leave the following note for a subordinate: “Please review the balance in the...
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
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 Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
there are expected to be 560,000 MHs. Using normal costing, the company applies the manufacturing overhead to products at a rate of $22.50 per MH ($12,600,000/560,000 MH) throughout the year. Using actual costing,...
, the cost of the production facilities’ rent might be assigned to the products at the rate of $4 per machine hour, but the rent actually occurs at the rate of $10,000 per month regardless of the number of machine...
. Another example of a non-discount method in capital budgeting is the accounting rate of return method, which is similar to the return on investment (ROI). [To overcome the above shortcomings, capital budgeting should...
, the business will have a credit card expense of $300. If July’s sales are $30,000 the credit card expense will be $900. The total credit card expense varies with sales because the fee has a constant rate of 3% of...
worked multiplied by an hourly rate of pay. Generally, the employees earning hourly wages will be paid in the week that follows the hours worked. Example of Wages For example, a warehouse employee works 40 hours during...
rate. For instance, in some states unprepared grocery items are not subject to a sales tax. Items purchased for resale are not subject to the sales tax when purchased by the retailer, but will be subject to the sales...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed...
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
Bond Issue Costs is a contra liability accounts reported along with Bonds Payable. Bond Issue Costs include the professional fees and registration fees associated with the issuance of bonds. The amount in the account...
This term is used in several ways. Some use the word interchangeably with revenues. Others use the word to signify a net amount, such as income from operations (revenues minus expenses in the company’s main...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
.) If a corporation had cash from operating activities of $200,000 and necessary capital expenditures of $60,000 the amount of free cash flow was $140,000. Times Interest Earned Times interest earned indicates a...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
recent year. The company’s income statement included Income Tax Expense of $140,000 and Interest Expense of $60,000. At the beginning of the year the company’s stockholders’ equity was $1,900,000 and at the end of...
. Select... increase decrease 7. The account Sales Discounts is likely to have a __________ balance. Select... debit credit 8. If a bank credits a company’s checking account for interest that the company has earned,...
ratio, here are some additional accounting/financial ratios: Quick ratio Debt to equity ratio Accounts receivable turnover ratio Days’ sales in inventory Interest coverage ratio Gross margin ratio Return on...
checking account, and 2) a credit of $30,000 to the company’s current liability account Notes Payable (or Loans Payable) for the amount of principal that it must repay to the bank. (If there is a difference between...
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...
costs will be referred to as period expenses since they will be reported on the income statement as selling, general and administrative (SG&A) or interest expenses. Example of Period Costs Selling expenses (such as...
accounts: Liability accounts such as Accounts Payable, Notes Payable, Wages Payable, Interest Payable, Income Taxes Payable, Customer Deposits, Deferred Income Taxes, etc. Hence, a credit balance in Accounts Payable...
or discount is to be amortized to interest expense over the life of the bonds. Hence, the balance in the premium or discount account is the unamortized balance. Where the Premium or Discount on Bonds Payable is...
selling, general and administrative expenses of $45,000 interest expense of $5,000 The company’s net profit was $10,000. The calculation is $200,000 minus $140,000 = gross profit of $60,000 minus $45,000 of SG&A...
will have the same accounts but different amounts due to the number of employees and/or the number of hours worked. Other examples of recurring entries with amounts that differ each period include sales, interest...
), in units, hours of services provided, etc. The basic calculation of the break-even point in sales dollars for a year is: fixed expenses (fixed manufacturing, fixed SG&A, fixed interest) for the year divided by the...
the following expenses: selling, general, administrative, interest, and income tax. Definition of Gross Profit Margin Gross profit margin is also referred to as the gross profit percentage or gross margin ratio. In that...
or services and other activities that are part of a company's main operations. REVENUES SUNEEREV Unscramble REVENUES SEENVREU Unscramble 3. The residual interest in the assets of an entity after deducting...
of the debit balance in Accounts Receivable is unlikely to be collected. A less common example of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated to...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
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