suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has purchased goods on account. The supplier has also increased...
suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has purchased goods on account. The supplier has also increased...
are recorded in a contra revenue account such as Sales Discounts. Hence, its debit balance will be one of the deductions from sales (gross sales) in order to report the amount of net sales. Example of Sales Discounts To...
What are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
on the preferred stock will appear on the corporation’s income statement as a subtraction from the corporation’s net income. This is necessary to report the earnings available for common stock. When the earnings...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
is reported on the income statement and the related accounts receivable is reported on the balance sheet (until the receivables are collected). Unfortunately, some customers may not pay the amount owed to the company....
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...
as __________ entries. 8. In a manual accounting system, the entries made at the end of the accounting year to the income statement accounts after the financial statements have been prepared are __________ entries. 9....
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Website Services Corp (WSC) completed extensive and unique services for a client and agreed to a single payment of $100,000 to be made two years from now. The client’s financial condition would require it to pay...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
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.
. In essence, the cost of goods sold is being matched with the revenues from the goods sold, thereby achieving the matching principle of accounting. When the cost of goods sold is subtracted from net sales, the result is...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
Accounts Receivable and Bad Debts Expense (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (27) Marked Wrong (0) Marked Right (0) accounts receivable This current asset represents a right to...
depreciation of $16,500). Since this transaction is not a main business activity of the retailer and since the $5,000 of cash received is greater than the net cost of $3,500 being removed from the accounts, the retailer...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
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...
the employees’ pay, 2) payroll taxes that are paid solely by the employer, and 3) the payroll taxes that are withheld from the employees’ gross pay and also paid by the employer Payments to employees for their net...
What is a fully depreciated asset? Definition of Fully Depreciated Asset A fully depreciated asset is a plant asset or fixed asset where the asset’s book value is equal to its estimated salvage value. In other words,...
asset is not expected to turn to cash within the operating cycle.) Expressed another way, a long-term asset is an asset that does not meet the criteria of being reported as a current asset. Hence, long-term assets are...
Total liabilities divided by total assets. This indicates how much of a corporation’s assets are financed by lenders/creditors as opposed to purchased with owners’ or stockholders’ funds. If a high...
asset (or noncurrent asset) under the balance sheet classification “Other assets”. The landlord that receives and holds the security deposit should report the amount as a liability. Example of a Security Deposit A...
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.
amounts of revenues, expenses, gains, losses, assets, liabilities, and stockholders’ equity. Common Characteristic of Adjusting Entries Every adjusting entry will involve: At least one balance sheet account, and At...
shown on the bank statement. Any differences must be justified. When there are no unexplained differences, accountants state that the bank statement has been reconciled. The bank reconciliation is an important part of a...
amounts as favorable or unfavorable__________. 8. Management by __________ has its focus on the deviations from the expected amounts. 9. A budgeted financial statement is sometimes referred to as a pro-__________...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
are likely to be paid a __________ instead of an hourly rate of pay. 4. The usual rate (net of state credits) for federal unemployment tax is__________% on the first $__________ of each employee’s annual wages. 5. A...
of completing a sale or service. They are reported as a liability until they become earned. Mark as wrong Mark as right depreciation This is the systematic allocation of a plant asset’s cost to expense over the...
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...
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...
amount, since reducing inventory has a positive effect on the company’s cash balance.) Additional Information The change in the inventory is reported as an adjustment to the company’s net income in the cash from...
payable are required when a company borrows money from a bank or other lender. Notes payable may also be part of a transaction to acquire expensive equipment. In certain cases, a supplier will require a note payable...
Treasury stock – total cost Retained earnings Accumulated other comprehensive income or loss Total stockholders’ equity Examples of the Descriptions for the Rows or Lines Appearing on the Statement Some typical...
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For the past 52 years, Harold Averkamp (CPA, MBA) has
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