in net income. Since the internet business was not purchased from another company and its cost to develop was not significant, the company’s balance sheet will report only the business’s cash, receivables and some...
in net income. Since the internet business was not purchased from another company and its cost to develop was not significant, the company’s balance sheet will report only the business’s cash, receivables and some...
recent costs remain in inventory. Definition of Gross Profit Net sales – Cost of goods sold = gross profit? Difference between LIFO and FIFO If there were no changes in the cost of inventory items (purchased or...
the contra sales account Sales Allowances for $10,000 (instead of debiting Sales) and credits Accounts Receivable. The company will likely combine the credit balance of $900,000 in the Sales account with the debit...
income, and net income for both periods will also be incorrect. Example of an Inventory Error Assume that a company began operations on December 1. During December the company purchased $100,000 of goods that it planned...
on December 31 was already in bankruptcy condition, the corporation must adjust its December 31 balance sheet by reducing its net receivables by $200,000 and reporting bad debts expense of $200,000 on its income...
. Another example of a non-discount method in capital budgeting is the accounting rate of return method, which is similar to the return on investment (ROI). [To overcome the above shortcomings, capital budgeting should...
flow assumption from FIFO to the LIFO because they were experiencing rising costs. By flowing the recent higher costs into the cost of goods sold on the income statement and tax return (and keeping the older lower costs...
. 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...
statements. One of the basic underlying principles in GAAP is the cost principle. This means that the inventories, the cost of goods sold, and the resulting net income must reflect the manufacturer’s actual historical...
This is another term used for the 1% or 2% sales discount or purchase discount. Mark as wrong Mark as right 1/10, net 30 This invoice term indicates that the net amount (after any return or allowance) is due within...
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...
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...
Revenue should be credited because ABC has not earned the $1,000 and ABC has an obligation to perform the service in the future. 11. ABC Co. performed services for Client Kay in December and billed Kay $4,000 with terms...
Expense will be understated (too little expense being reported) by $1,000. 2) Net Income will be overstated (too much net income being reported) by $1,000. 3) Owner's equity will be overstated by $1,000. 4)...
of dividends will reduce the balance in __________ earnings. RETAINED NRAEEDTI Unscramble RETAINED EDTERAIN Unscramble 16. Inventories are often reported at the ________ of cost or net realizable value. LOWER WELOR...
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...
, the balance in the account Allowance for Uncollectible Accounts must be a credit balance of $6,000. This will communicate that the net amount that will be turning to cash is $94,000. If the balance in the Allowance for...
as the employee’s net pay. Select... True False 3. Salaried managers and executives who are not entitled to receive overtime compensation are referred to as __________ employees. 4. A company’s outside accountant is...
. If the __________ __________ __________ of a company’s inventory is less than its cost, this lower amount will be reported on the company’s balance sheet. 3. If an error results in the amount of ending inventory...
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...
. However, the shares of common stock often have no par value or a very small par value. Retained Earnings Generally, retained earnings are the cumulative amounts of the corporation’s earnings or net income since the...
is available at www.FASB.org. assets liabilities equity revenues expenses gains losses comprehensive income 21. Net assets. Select... assets liabilities equity revenues expenses gains losses comprehensive income 22....
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 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...
and natural gas are likely to require this type of adjusting entry. Select... Accrual Deferral 19. Prepayments are associated with __________. Select... accruals deferrals 20. Failure to accrue interest expense at the...
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...
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...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
-in capital and deferred revenues Retained earnings and net income Paid-in capital and retained earnings 16. A new corporation’s first transaction involves earning service fees from a client. The client is allowed to...
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.
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 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...
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 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...
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...
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...
dollar.) 16. If the December 31 adjusting entry is not made, the company’s net income will be too __________. Select... high low 17. If the December 31 adjusting entry is not made, the amount of the company’s...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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