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...
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...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
, 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...
What is the gross margin ratio? Definition of Gross Margin Ratio The gross margin ratio is a percentage resulting from dividing the amount of a company’s gross profit by the amount of its net sales. (The gross margin...
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...
capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
of the sale, service, or date of the sales invoice. Example of 2/10 Assume that a company is in an industry with credit terms of net 30 days. This means the amount owed by the customer is due within 30 days of the...
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...
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...
as __________ products. 5. A product that emerges from a common process but its total sales value is insignificant is known as a __________ – __________. 6. Net __________ value is the estimated sales value in the...
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...
turnover ratio is 3, the days’ sales in inventory will be 120 days [360 days/3]. Free Cash Flow The calculation of free cash flow is: net cash flow from operating activities minus the necessary capital...
that consider the time value of money. They are: Net present value Internal rate of return Both of these models are also referred to as discounted cash flow (DCF) models. Discounting Future Cash Flows To recognize the...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
date. As a result, the increase in accounts receivable is reported as a negative amount on the SCF. The negative amount is shown as an adjustment to the amount of net income listed in the operating activities section of...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
, and others which can cause different net incomes. Further, there may be some potential liabilities that are reasonably possible and could dramatically alter the reported amount of net income. 4. A retailer’s income...
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...
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...
are not an expense and therefore do not reduce the corporation’s net income or its taxable income. Example of Tax Advantage of Bonds Instead of Stock If a corporation issues $10,000,000 of bonds having an interest...
format? Single-step Wrong. There is no subtotal in the single-step income statement. Multiple-step Right! It will appear as the result of subtracting the cost of goods sold from net sales. 8. Which income statement...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
the interest on its debt even if its earnings were to decrease. A small interest coverage ratio sends a caution signal. Example of Interest Coverage Ratio Assume a corporation’s most recent annual income statement...
, savings and retirement contributions, etc. Gross Pay vs Net Pay Net pay is the amount remaining after payroll taxes and other amounts are deducted from an employee’s gross pay. Net pay is the amount of the...
in a revenue account. A contra revenue account allows a company to see the original amount sold and to also see the items that reduced the sales to the amount of net sales. Examples of Contra Revenue Accounts Two...
income covers the same period of time as the income statement and consists of two major sections: Net income (or net earnings) from the company’s income statement Other comprehensive income, which consists of positive...
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
adjustments related to these purchases of goods will be credited to a general ledger contra account such as Purchases Discounts or Purchases Returns and Allowances. When the balances of these three purchases accounts...
What is a multiple-step income statement? Multiple-Step Income Statement Definition A multiple-step income statement presents two important subtotals before arriving at a company’s net income. For a company that sells...
What is the difference between break-even point and payback period? Definition of Break-Even Point The break-even point is the amount of sales required to cover a company’s costs and expenses that are reported on its...
of a company’s revenues, expenses, gains, losses, and the resulting net income that occurred during a year, quarter, or other period of time. Examples of Items Appearing in the Income Statement The main items reported...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
What is the difference between gross profit margin and gross margin? Definition of Gross Profit Gross profit is an amount that is computed as follows: A company’s net Sales minus its cost of goods sold A product’s...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
Financial Statements Video Training Part 10 Income statement: formats (multiple-step, single-step, comparative, amounts as % of net sales) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
See net operating income (NOI).
See net realizable value.
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