Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
What is the cost of capital? Definition of Cost of Capital The cost of capital is the weighted-average, after-tax cost of a corporation’s long-term debt, preferred stock (if any), and the stockholders’ equity...
an accounting firm for tax advice. Two tax experts have lunch with the owner and inform her how to process transactions so that she will enjoy tax savings of $40,000. The owner was grateful for the enjoyable lunch and...
debt is an expense of the corporation and it reduces the corporation’s net income. For profitable corporations, interest expense also reduces its taxable income and the corresponding income tax expense. The income tax...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
Depreciation Methods Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method Sum-of-the-years’-digits...
Where can I find the amount of income taxes paid by a corporation? Definition of Income Taxes Paid by a Corporation The amount of income tax paid by a corporation is different from the amount of income tax (income tax...
to address the second part of your question, which involved the R&D costs on the income tax returns. You will need to ask an income tax adviser or do a search on www.IRS.gov regarding the capitalization of R&D...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
expense and income tax expense divided by its interest expense. The larger the times interest earned ratio, the more likely that the corporation can make its interest payments. The times interest earned ratio is also...
is also known as the times interest earned ratio. The interest coverage ratio is computed by dividing 1) a corporation’s annual income before interest and income tax expenses, by 2) its annual interest expense. A...
Instead of Stock There are several advantages of issuing bonds (or other debt) instead of issuing shares of common stock: Interest on bonds and other debt is deductible on the corporation’s income tax return while the...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
financial statements and at the same time use accelerated depreciation on its income tax returns. Using accelerated depreciation on its U.S. income tax returns will mean greater depreciation expense and smaller taxable...
the goods) and is typically a percentage of the selling prices. The seller must file a sales tax report and remit the sales taxes it had collected. Basically, the company making the sale and collecting the sales taxes...
has specified the number of years that various assets will be useful and it assumes there will be no salvage value. The IRS also allows a company’s tax return to deduct larger amounts of depreciation in the earlier...
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
’ equity are reduced with the debit to Depreciation Expense The carrying value of the assets being depreciated and amount of total assets are reduced by the credit to Accumulated Depreciation The depreciation expense...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
(before tax) that will appear on each business’s income statement? Select... Jay Co. $50,000; Kay Corp. $50,000 Jay Co. $120,000; Kay Corp. $120,000 Jay Co. $120,000; Kay Corp. $50,000 Jay Co. $50,000; Kay Corp....
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...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
of fixed manufacturing overhead costs The amount of the fixed manufacturing overhead costs that were assigned to (or absorbed by) the company’s good output Example of Production Volume Variance Assume that a...
What is interest income? Definition of Interest Income Interest income is the amount of interest earned on investments (that promise to pay interest) and/or compensation for agreeing to receive cash payments from...
as a current asset. Example of Insurance Expense Let’s assume that a retailer has insurance policies for its property, general liability, vehicles, and employees’ worker compensation, medical, dental, life, and...
be reported on the balance sheet as part of a current liability description such as accrued compensation, accrued payroll liabilities, accrued expenses, accrued liabilities, etc. Join PRO to Track Progress Mark the...
or loss Other comprehensive income or detailed amounts Stock-based compensation Exercise of stock options Sale of common stock Repurchase of common stock Cash dividends declared Ending balances To see a statement of...
one year later. The $11,000 represents: An amount for today’s services Interest compensation for the company waiting 365 days to be paid Under the accrual basis of accounting and with a time value of money of 10%, the...
to the products that require the activities. Example of Traditional Method of Cost Accounting Assume that a manufacturer has $2,000,000 of manufacturing overhead costs consisting of depreciation, electricity, insurance,...
Depreciation (Explanation). 1. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Wrong. The amount on the...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
their personal income tax returns based on the calendar year of January 1 through December 31. Many U.S. corporations also have accounting and income tax years that coincide with the calendar year of January 1 through...
will be significant. Example of LIFO with Increasing Costs In the U.S., LIFO is considered to be better when the costs of inventory items are changing. The reason is LIFO is matching the latest costs of products with...
, they are part of comprehensive income). Net income is also known as net earnings. The details of the net income calculation are reported in the business’s income statement. The net income of a regular U.S....
of Public Accounting Services The services provided by public accounting firms vary by the size and the expertise of the firm. Here are some of the public accounting services: Preparation, review, and auditing of the...
will be collected Using the account Allowance for Doubtful Accounts is preferred for financial reporting. However, it is generally not allowed for U.S. income tax reporting. You should always consultant with a tax...
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