with its suppliers, the company will have the benefit of having a larger cash balance (even though the amount of working capital will not change). Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
with its suppliers, the company will have the benefit of having a larger cash balance (even though the amount of working capital will not change). Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
year with a zero balance. The temporary accounts include the income statement accounts (revenue, expense, gain, loss, income summary) and also the drawing account of a sole proprietorship. The balances in these accounts...
expense over its useful life Depreciable assets are reported on the balance sheet under the asset heading property, plant and equipment. Examples of Depreciable Assets Some examples of depreciable assets include the...
What are the stockholders' equity accounts? The stockholders’ equity accounts are balance sheet accounts and a part of the accounting equation Assets = Liabilities + Stockholders’ Equity. In this light you can...
during their useful lives. Plant assets (other than land) are depreciated over their useful lives and each year’s depreciation is credited to a contra asset account Accumulated Depreciation. Plant assets and the...
balances and will be reported on the balance sheet as either current liabilities or noncurrent (or long-term) liabilities. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
that during a recent year a company’s income statement reported net sales of $2,100,000. During the same period, the company’s total assets reported on its 12 monthly balance sheets averaged $1,400,000. The...
will be a negative $8,000. The negative amount of owner’s equity is a problem that will be obvious to anyone reading the company’s balance sheet. However, the company may be able to operate if its cash inflows are...
What is the difference between accounts payable and accrued expenses payable? Definition of Accounts Payable Accounts Payable is a liability account in which suppliers’ or vendors’ approved invoices are recorded. As...
What is owner's equity? Definition of Owner’s Equity Owner’s equity is one of the three main sections of a sole proprietorship’s balance sheet and one of the components of the accounting equation: Assets =...
is sold for $5,000. If the truck had a cost of $40,000 and accumulated depreciation of $35,000 there will be no gain or loss reported on the income statement. The reason is the $5,000 received is equal to the $5,000 of...
What is the definition of net sales? Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company makes a sale, the general ledger...
statement, statement of comprehensive income, balance sheet, statement of cash flows, and statement of stockholders’ equity) The notes to the financial statements Press releases and conference calls regarding...
liability account that is reported on the balance sheet. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current...
on common stock may appear on the balance sheet as paid-in capital in excess of par value–common stock or additional paid-in capital. Example of Premium on Common Stock Assume that a corporation’s common stock has a...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
What does Accumulated Depreciation tell us? Definition of Accumulated Depreciation Accumulated depreciation reports the amount of depreciation that has been recorded from the time an asset was acquired until the date of...
in a business. They are reported in the Property, Plant and Equipment section of the balance sheet. The fixed/plant assets are depreciated over their estimated useful lives (except for land which is not...
In what order are liabilities listed in the chart of accounts? Order for Listing Liabilities It is logical for a company’s liabilities to be organized in the chart of accounts in the same way as they are presented on...
of a company’s financial position at the end of the accounting year. The reason is that all assets that were earned are reported and all liabilities that were incurred will be reported on the balance sheet. The...
by multiplying both the “2%” and the “20 days” by 18 (in order to get close to the 365 days in a year). The result is a per annum rate of approximately 36%. Another example involves a business charging its...
increasing from 200,000 shares to 400,000 shares.” Since a stock split does not change the balance in the Common Stock account, a complete journal entry was not required. The memorandum entry merely notes for future...
system, if the balance in the account Prepaid Insurance is overstated (too much is being reported) it is likely that the account Insurance Expense is understated (too little is being reported). Join PRO to Track...
What are common-size financial statements? Common-size financial statements present the financial statement amounts as a percentage of a base number. For example, the common-size income statement will report the revenue...
by transferring its balance to the owner’s capital account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
to the account Cash. Effect of Drawings on the Financial Statements The owner’s drawings will affect the company’s balance sheet by decreasing the asset that is withdrawn and by the decrease in owner’s equity. The...
corporation can be computed using the before tax earnings and/or the after tax earnings. Example of Return on Assets Ratio Assume that during its most recent year, a company’s income statement reported net income...
, the balance in the account Inventory should be the cost of the ending inventory. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
, the check will not clear Payer Corporation’s checking account until Monday. Hence, Payer Corporation will have $5,000 of float between Wednesday and Monday. Mary plays the float when she mails her rent check on...
. The combination of all the budgets is referred to as the company’s master budget or profit plan. Budgets help management decide which activities it will undertake and how the company’s resources will be used. If...
balance sheet of December 31 reports current assets of $450,000 and current liabilities of $320,000. The working capital at the final instant of December 31 is $130,000 ($450,000 – $320,000). Even with a significant...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
software may allow you to go into a previous period’s (as well as the current period’s) activity and remove a voided check or change the amount to zero. This will also increase the balance in the Cash account and...
. There is no accrual for the principal portion of the loan payment. The principal balance of the loan is not reduced until the actual principal payment occurs. Join PRO to Track Progress Mark the Question as Read...
and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
. The land used in a business will be reported on the company’s balance sheet under the asset heading of property, plant and equipment. Example of Land Assume that a company purchases a warehouse for its business...
What is the fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
sold, which is reported on the income statement. (The costs of the products that are not sold are reported as inventory on the balance sheet. Hence, the inventory will contain some of the manufacturing salaries and...
Typically, the combined amount of cash and cash equivalents will be reported on the balance sheet as the first item in the section with the heading current assets. Join PRO to Track Progress Mark the Question as Read...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
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