have been reduced by the cumulative amount of depreciation taken over the years. Other factors contributing to a high market value might be a corporation’s earnings and dividends that are consistently growing...
have been reduced by the cumulative amount of depreciation taken over the years. Other factors contributing to a high market value might be a corporation’s earnings and dividends that are consistently growing...
allows a client to pay for a service one year after the service is completed, the amount received is assumed to consist of two parts: Interest for waiting one year to be paid The present value of the services provided...
a vibrant campus placement or career services office with a track record of placing accounting students in the professional positions that you seek. Here’s my point. What if many of the top performers on the CPA Exam...
, the outside accountant converts the client’s data into financial statements without providing any assurances or auditing services. A compilation report should accompany the compiled financial statements to indicate...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
that a company uses the accrual basis of accounting. In its first month of operations, it provides $10,000 of services to its clients and allows them to pay 30 days later. It also incurs $2,000 of expenses of which it...
The balance sheet and income statement are connected. Definition of Balance Sheet and Income Statement The balance sheet reflects the accounting equation: Assets = Liabilities + Owner’s (Stockholders’) Equity When a...
such as religious, education, health, social services, arts, etc. Nonprofit organizations may apply to be exempt from federal income taxes. Donors’ contributions to nonprofit organizations may or may not be charitable...
the contribution margin to be reduced. With less contribution margin, the company will need more sales to cover its fixed expenses. A reduction in the contribution margin caused by a decrease in selling prices. A less...
’ equity usually have credit balances. When a company provides services for cash, its asset Cash is increased by a debit and its owner’s equity is increased by a credit. The credit is initially recorded in a revenue...
What is sales mix? Definition of Sales Mix Sales mix is the relative proportion or ratio of a business’s products that are sold. Sales mix is important because a company’s products usually have different degrees of...
of buying and selling merchandise, providing services, etc. Basically, the cash from operating activities includes the company’s cash flows except for those reported as cash flows from 1) investing activities (buying...
), 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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
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...
for inventory valuation purposes.) 6. Manufacturing overhead must be assigned to both work-in-process inventory and finished goods inventory for external financial reporting purposes. True Right! False Wrong. 7. Only...
with the amount in the Purchases account will result in the cost of goods sold. In our example, the $5,000 credit balance in the account Inventory Change will reduce the $200,000 of Purchases, resulting in the cost of...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. 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...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
Sales. Its detailed purchases and changes in inventory will be presented as one amount with the description Cost of Goods Sold. Perhaps thousands of operating expenses will be presented as one amount with the...
is helpful if the bank’s customer is traveling in countries where the customer is not known. The letter of credit will allow the customer to purchase goods on credit because the seller is assured of payment. In other...
The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
, the depreciation on trucks used in the manufacturing process is assigned to the goods produced rather than being expensed directly. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
though NIFO cannot be used for valuing inventory and the cost of goods sold on the financial statements, it is useful for making decisions. For example, some companies will use NIFO when determining selling prices. Join...
receivable turnover ratio. days' sales in accounts receivable (or) average collection period This is the result of dividing 365 or 360 days by the accounts receivable turnover ratio. Mark as wrong Mark as right...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
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