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...
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...
for Doubtful Accounts is a contra account to __________ __________. 4. Inventory is often reported at the lower of __________ or net __________ value. 5. The cost of insurance premiums that have been paid but have not...
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...
will report each asset, liability, and owner equity amount as a percentage of total assets. Common-size financial statements allow you to compare the financial statements of large companies with the financial statements...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
based on historical costs (required by US GAAP) will be less than the depreciation computed by using the higher replacement cost of the plant assets. The additional profit from this difference in depreciation is...
is the difference between the total amount of assets and the total amount of liabilities as reported on the balance sheet, the corporation’s book value is not the market value of the corporation. Two reasons for the...
depreciation cannot exceed the asset’s cost. The cost principle prohibits a company from recording an asset that was not acquired in a transaction. Hence, a company cannot report its highly successful management team...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
prepares monthly financial statements. Select... an accrual a deferral 27. Customer Deposits and Deferred Revenues are two examples of __________ accounts. Select... asset liability revenue 28. When the same amount of...
was the corporation’s net income during the year? Select... $35,000.00 $45,000.00 $55,000.00 View Coaching Using the accounting equation, we can determine that the stockholders' equity has increased by $45,000...
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
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...
If inventory is understated at the end of the year, what is the effect on net income? Definition of Inventory is Understated If inventory is understated at the end of the year, it means that the amount of inventory being...
expensing assets having a cost of less than $2,500 instead of setting up fixed asset records and depreciating those assets over their useful lives. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
value of 1 table is used. (However, using an online calculator or a financial calculator is more practical, precise and faster.) Net Present Value Model Net present value (NPV) is one of the discounted cash flow models...
What is an unsecured creditor? Definition of Unsecured Creditor An unsecured creditor is often a vendor or supplier that: Shipped goods to a customer as part of a sale on credit Has not been paid Does not have a lien on...
inventory. Example of Importance of Accurate Inventory Here is an example of why accuracy in calculating inventory is important. After accounting for the total cost of 1) the items purchased or produced in the current...
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...
’ equity consists of the amounts the corporation had received from the sale of its common and preferred shares of stock plus the earnings of the corporation minus any distributions to the stockholders. In other words,...
than the asset’s book value. Losses An example is the Loss on Sale of a Plant Asset which resulted from selling a plant asset for less than the asset’s book value. The net result (or combination) of these components...
. A corporation cannot record a gain or loss on its income statement for transactions involving its own __________. 17. The preferred __________ requirement must be deducted from a corporation’s net income when...
Are fixed assets the same as plant assets? Definition of Fixed Assets and Plant Assets My experience indicates that people use the term fixed assets to mean the same as plant assets. As a result, I define both fixed...
the company lists its cash inflows and cash outflows resulting from the disposal or acquisition of the company’s long-term assets that took place during the time indicated in the heading of the statement. Examples of...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
the corporation’s assets increased and its stockholders’ equity (specifically the contributed capital) increased. Example of Contributed Capital Assume a corporation issued and sold 10,000 new shares of its common...
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...
. A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. (Restricted cash should be recorded in a different account.)...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
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...
to the date of the sale. Next, the asset’s cost and its accumulated depreciation are removed from the accounts. Any money received is debited to Cash and any gain or loss on the sale is also recorded.] Example of a...
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
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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