since it has a credit balance. Whenever depreciation expense is recorded (with a debit entry), Accumulated Depreciation is credited. The combination (or net) of the asset’s debit balance and the asset’s accumulated...
since it has a credit balance. Whenever depreciation expense is recorded (with a debit entry), Accumulated Depreciation is credited. The combination (or net) of the asset’s debit balance and the asset’s accumulated...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
What are byproducts? Byproducts, or by-products, are products with relatively little value that emerge from a common process along with the main products. The main products have significant value and are referred to as...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
that best matches the descriptions listed as items 6 - 16: Each principle or term can be used several times. conservatism cost economic entity full disclosure going concern industry practices matching materiality...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
than its par value, two accounts are involved: The account Common Stock is used to record the par value of the shares being issued The account Paid-in Capital in Excess of Par?Common Stock, or Premium on Common Stock...
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
Accounts Receivable and Bad Debts Expense Accounts Receivable Accounts receivable refers to a company’s unsecured claim for money it is owed by a customer or client for goods and/or services the company had...
of the bonds or notes payable. The credit balance in the liability account Bonds Payable minus the debit balances in the contra-liability accounts Discount on Bonds Payable and Bond Issue Costs results in the carrying...
as an asset and expensed later. To defer the cost to the balance sheet is to capitalize the costs. Examples of Costs Being Expensed Costs are reported as expenses in the accounting period when they are used up, have...
value. For example, the “A” items might be 20% of the items in inventory which account for 70% of the inventory value. At the other extreme the “C” items might be 60% of the items in inventory but they account...
What is goodwill? Definition of Goodwill In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase...
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...
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
The stockholders’ equity account which reports the par value of the preferred shares of stock that have been issued. Amounts received that are greater than the par value are recorded in Paid-in Capital in Excess of...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
The products with significant value that emerge at a split-off point in a process. When a joint product has little value it is referred to as a by-product.
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
The stockholders’ equity account that reports the par or stated value of the issued shares of common stock. If the common stock does not have a par or stated value, this account will report the amount received when...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Unscramble 3. Land is an asset that is not ____________________. DEPRECIATED EIEAPECRDTD Unscramble DEPRECIATED EIEEACRDTPD Unscramble 4. An asset's book value is its cost minus its __________________ depreciation....
as a separate amount within stockholders' equity. COMPREHENSIVE ISRVCHOEEMPEN Unscramble COMPREHENSIVE VHEMROEPNSCEI Unscramble 6. A corporation's own stock that it has repurchased, but has not retired is...
are as of a _________ in time. POINT ONTIP Unscramble POINT INOTP Unscramble 2. Resources. ASSETS SEASTS Unscramble ASSETS ASETSS Unscramble 3. Obligations. LIABILITIES IIABLIILTES Unscramble LIABILITIES LAIISBIIELT...
by reading our Accounting Basics (Explanation). 1. Which financial statement reports the revenues and expenses for a period of time such as a year or a month? Balance Sheet Wrong. The balance sheet reports assets,...
Usually financial statements refer to the balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholders’ equity. The balance sheet reports information as of...
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
What is a cash cow? A cash cow is often a profitable product or service that dominates a market and generates far more cash than is needed to maintain its market position. Companies may use the money from the cash cow to...
. For example, a company may arrange with its bank to borrow money as needed but never owe the bank in excess of $500,000. The agreement might specify that interest will be calculated by multiplying the prime rate times...
basis for measuring profitability in a limited time period. ACCRUAL LAAURCC Unscramble ACCRUAL AUALCRC Unscramble 5. The expense associated with debt. INTEREST RENESITT Unscramble INTEREST ETRESITN Unscramble 6. At the...
value or legal capital of these issued shares. common stock This type of capital stock is present at every U.S. corporation. It is also the title of the general ledger account that reports the total par value or legal...
within stockholders’ equity as part of which category? Select... Paid-in capital Retained earnings Treasury stock View Coaching Paid-in capital reports the amounts that the corporation received at the time the...
An expectation that as a task is repeated there will be significant time reductions during the early repetitions. The time savings will dissipate after continuous performance. This is important to consider when setting...
. Operating Cycle If a company sells goods (products, component parts, etc.) its operating cycle is the time it takes for a company’s money to purchase the inventory items and for the money from their sale to return to...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
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