sheet unless they were acquired in a business transaction. The balance sheet should be read with the other financial statements (income statement, statement of comprehensive income, statement of cash flows, and the...
sheet unless they were acquired in a business transaction. The balance sheet should be read with the other financial statements (income statement, statement of comprehensive income, statement of cash flows, and the...
year is reported under investment activities on the statement of cash flows. Definition of Revenue Expenditure A revenue expenditure is an amount that is spent for an expense that will be matched immediately with the...
. A nonprofit organization’s financial reporting includes a statement of financial position, a statement of activities, a statement of functional expenses, and a statement of cash flows. Some nonprofits are required to...
and it is often used to compute the net present value of the cash flows in a proposed investment. It is also considered to be the minimum after-tax internal rate of return to be earned on new investments. For a...
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 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...
owned by a company that have future value which can be measured. assets These are the resources owned by a company that have future value which can be measured. Mark as wrong Mark as right liabilities These are a...
statement (regardless of when the company pays the commissions). If a cause-and-effect relationship does not exist between a company’s revenues and its costs, and there is no future economic benefit which can be...
What is meant by the term relevance in accounting? Definition of Relevance In accounting, the term relevance could mean one of the following: An amount, disclosure, etc. that will make a difference to the decision maker...
a negative balance. This will also result in bank fees for the company and the endorser/payee. It also signals to the endorser/payee that the company has a cash flow problem. The checks being presented are not...
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...
Is advertising an asset or an expense? Definition of Advertising Expense Advertising is the amount a company incurs to promote its products, brands, and image via television, radio, magazines, Internet, etc. Since the...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
of revenues, expenses, gains, and losses. It is also referred to as the P&L. Mark as wrong Mark as right cash flow statement (or) statement of cash flows This financial statement reports the major changes in a...
How do you compute the selling price of a bond? Definition of Selling Price of Bond The selling price (or the market value) of a bond is the present value of the future contractual cash amounts that are going to be...
at a fixed rate until the bonds mature many years into the future. If the bonds’ interest rate is less than the market rates when the bonds are offered, the bonds will sell at a discount. If the bonds’ interest rate...
when the bill arrives in January The following are a few examples of payments that will never be an expense: A payment of $100,000 to purchase the land adjacent to a company Payments that are cash dividends to...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
its bank and signs a promissory note due in six months. Local Retailer records $20,000 as a credit to its current liability account Notes Payable (and debits its Cash account). The bank records the $20,000 promissory...
Where is a contract with a customer reported on the balance sheet? A contract to perform future services for a customer is not reported on the balance sheet of the company that will be providing the services. For...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
of adjusting entry is needed prior to issuing financial statements because some of the revenue and/or expense amounts in the general ledger pertain to a future accounting period. deferral (or) prepayment This type...
What is the difference between stock dividend and cash dividend? Definition of a Stock Dividend A stock dividend is a dividend consisting of additional shares of stock. Assume that before a corporation declares a stock...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
When does a negative cash balance appear on the balance sheet? Definition of Negative Cash Balance A negative cash balance results when the cash account in a company’s general ledger has a credit balance. The credit or...
What does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
flows, is often compared to net income and is also used in computing a company’s free cash flow. net cash provided by operating activities This amount, which is the total of the first section of the statement of cash...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
. When calculating the present value of a bond, which rate is used to discount the future cash flows? Select... Contractual Face Market 24. When market interest rates increase, the market value of an already issued bond...
This current liability account reports the amount of interest the company owes as of the date of the balance sheet. (Future interest is not recorded as a liability.)
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
A current asset account which contains the amount of investments that can and will be sold in the near future.
A balance sheet liability account which reports the total amount owed to employees at the balance sheet date for future vacation days as a result of the employees’ past work.
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
A current asset account that reports the amount of future rent expense that was paid in advance of the rental period. The amount reported on the balance sheet is the amount that has not yet been used or expired as of the...
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