What is a deferral adjusting entry? Definition of Deferral Adjusting Entry A deferral adjusting entry (one of three types of adjusting entries) pertains to a transaction that has already been recorded in the general...
What is a deferral adjusting entry? Definition of Deferral Adjusting Entry A deferral adjusting entry (one of three types of adjusting entries) pertains to a transaction that has already been recorded in the general...
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...
, and depreciation expense of $8,000. Therefore, the net income reported on its income statement was $22,000. (The depreciation pertains to a truck purchased in an earlier year.) Depreciation and the Statement of Cash...
on its investments. The investment interest and dividend amounts earned will be reported on the income statement as other income. To provide more clarity, accountants use the term net income to describe the amount...
of goods sold. The cost of goods sold is an expense that is matched with the sales reported on the income statement. With inflation (costs increasing), the recent higher costs will be the first costs reported as the...
value of money or future interest which is contained (is implicit) within the future cash amounts. Accountants record the present value of a future amount when the cash amount, cash equivalent amount, or fair market...
Business X for $5 million based on Business X’s annual net income X 10. The fair value of Business X’s identifiable assets was $4 million and its liabilities were $1 million. Therefore, Company A is paying $5...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
What is the difference between dividends and interest expense? Definition of Dividends Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and...
assets, liabilities, and stockholders’ (or owner’s) equity as of the final moment of the accounting period. Mark as wrong Mark as right income statement (or) statement of earnings (or) statement of operations This...
Where are accruals reflected on the balance sheet? Definition of Accruals The accrual of expenses and liabilities refers to expenses and/or liabilities that a company has incurred, but the company has not yet paid...
What is comprehensive income? Definition of Comprehensive Income Comprehensive income for a corporation is the combination of the following amounts which occurred during a specified period of time such as a year,...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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...
that the balance sheet reports the net amount that is expected to be collected. The credit balance in the Allowance account is associated with the income statement account Bad Debts Expense. In other words, when a...
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...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
current obligations. Mark as wrong Mark as right return on assets This ratio is computed by dividing a company’s after tax net income during a year by the company’s average total assets during the same year. return...
activities. The combination of the cash inflows and the cash outflows from a company’s operations (activities outside of its investing and financing activities). loss on disposal, net of tax. An accounting loss on the...
Income Statement Income Statement The income statement is also known as the statement of income, statement of operations, statement of earnings, profit and loss statement, and P&L. It reports a corporation’s...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
of presenting the statement of cash flows, the cash from operating activities begins with the company’s net income and is then adjusted for depreciation expense and the changes in the current assets and current...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
containing the adjusted balances for the asset, liability and owner’s equity accounts. Under the Income Statement columns, the difference between the total of the debit column and the credit column is the amount of...
in the total amount of a corporation’s stockholders’ equity: Positive net earnings or net income reported on the corporation’s income statement. Some positive Other Comprehensive Income items occurred but they are...
, revenue is the amount earned from customers and clients before subtracting the company’s expenses. Revenue vs Net Income While revenue is the top line on a company’s income statement, net income is often referred...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
show a negative net income. margin of safety This is the amount of sales above the break-even point. It is the amount by which sales could drop before the company would show a negative net income. Mark as wrong Mark as...
corporations is the __________. AICPA Wrong. The AICPA is not a government agency. FASB Wrong. The FASB is not a government agency. IRS Wrong. This government agency is associated with income tax reporting. SEC Right!...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
The owner’s equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The...
The owner’s equity account that contains the amount invested in the sole proprietorship by Matt Jones plus the net income since the company began minus the draws made by Matt Jones since the company began. The...
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
from creditors (and the remaining 27% came from stockholders). 6. JamCorp’s income statement for its most recent year reported the following: Net sales $500,000 Cost of goods sold $350,000 Selling and admin expenses...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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