for $500 Credit to Sales Taxes Payable for $30 Note that Sales Revenues did not include the $30 of sales taxes collected. When the retailer remits the sales taxes to the government, the retailer will reduces its...
for $500 Credit to Sales Taxes Payable for $30 Note that Sales Revenues did not include the $30 of sales taxes collected. When the retailer remits the sales taxes to the government, the retailer will reduces its...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
of depreciation, while the “declining balance” refers to the asset’s book value or carrying value at the beginning of the accounting period. Since book value is an asset’s cost minus its accumulated...
is the cost of goods on hand, it makes sense to relate it to the cost of goods sold. Assume that during the past year a company’s inventory had an average cost of $10,000. (This was the average of the amounts in the...
Weekly Income Statement When I became a director of a meatpacking company, I was concerned about the thin profit margins, the corporation’s lack of working capital, and my inexperience in the industry. The company...
What is the payout ratio? The payout ratio indicates the percentage of a corporation’s earnings which are distributed as cash dividends to its stockholders. Typically, the payout ratio is computed by using the per...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
What does the term organic growth mean? Organic growth often refers to the growth in a company’s sales that did not occur because of an acquisition of another company. Expressed another way, organic growth is...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
record the $9 cash discount with a debit to the account Sales Discounts. The buyer will record the $9 savings as a credit to Purchase Discounts or as a reduction to the cost recorded in inventory. My dentist offers a 5%...
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
liability is reduced. Think of those future repair/replacement costs as a selling or promotion expense to get the sale to occur. Periodically, the credit balance in the Warranty Liability account is reviewed to be...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
What is the book value per share of stock? Definition of Book Value per Share of Stock The book value of a corporation is the amount of its stockholders’ equity. Assuming the corporation does not have preferred stock...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
31 from the bank statement balance as of August 31. The resulting amount is the adjusted balance per bank. Next, look at the general ledger account that is associated with the bank statement. Let’s assume it is...
What is the difference between gross profit margin and gross margin? Definition of Gross Profit Gross profit is an amount that is computed as follows: A company’s net Sales minus its cost of goods sold A product’s...
What is a stockholder? Definition of Stockholder A stockholder (also known as a shareholder) is the owner of one or more shares of a corporation’s capital stock. A stockholder is considered to be separate from the...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
coverage from December 1 through May 31. Examples of Two Methods for Recording Prepaid Expenses One method for recording a prepaid expense is to record the entire payment in an asset account. For example, assume that on...
What are consolidated statements of operations? Consolidated statements of operations is the heading appearing on the financial statement also referred to as the income statement. In a small survey of 14 U.S....
can see, the entry does not involve the account Cash. Hence, depreciation expense is referred to as a noncash expense. Example of Depreciation Assume that a sidewalk florist operates a cash only business. During the...
Where should a business report cash which is restricted to purchase a long-term asset? The cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under the asset...
to Cash and a $3,000 credit to the liability account Customer Deposits or Unearned Revenues. With no downpayment or advance payment in December, there is no entry recorded.) The $20,000 contract is not reported as an...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
How should a mortgage loan payable be reported on a classified balance sheet? Definition of a Mortgage Loan Payable The account Mortgage Loan Payable contains the principal amount owed on a mortgage loan. (Any interest...
What is an intangible asset? Definition of Intangible Asset An intangible asset is an asset that you cannot touch, since it lacks physical substance. Accountants record intangible assets at their cost when they are...
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
What is the employer's Social Security tax rate for 2022 and 2023? Employer’s Social Security Payroll Tax for 2022 The employer’s Social Security payroll tax rate for 2022 (January 1 through December 31, 2022) is the...
What is the difference between FIFO and LIFO? Difference Between FIFO and LIFO The difference between FIFO and LIFO will exist only if the unit costs of a company’s products are increasing or decreasing. U.S. companies...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise 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 a compilation? Definition of Compilation A compilation refers to a company’s financial statements that have been prepared or compiled by an outside accountant. A compilation is usually part of an accounting...
Kindly illustrate various depreciation methods. Definition of Depreciation Depreciation is the systematic allocation of the cost of an asset to Depreciation Expenses over the asset’s useful life. If an asset will have...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
is deferred to the balance sheet account Prepaid Rent (or Prepaid Expenses,) which is a current asset. During the three months of January 1 through March 31 (when the prepaid rent is expiring) the $3,000 prepayment must...
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