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...
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...
of Direct Labor Variances Direct labor variances often consist of two parts: Direct Labor Rate Variance which reports the difference between the actual pay rate and the standard pay rate Direct Labor Efficiency Variance...
to the company’s weak financial position it would normally have to pay a high interest rate if it were able to borrow money. In this example, the promissory note does not show an explicit interest cost. However, due...
. The company will then have to pay the endorsers/payees the amounts on the checks plus any fees their banks charged for handling the NSF checks. The payees may require the company to pay for future transactions...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
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 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...
balance sheet since it will report accounts receivable and prepaid expenses plus accounts payable, deferred revenues and other liabilities. 2. Under the accrual method of accounting, in which month should a company...
, a decrease in accounts payable will be __________ __________ net income in the operating activities section of the statement of cash flows. Select... added to deducted from 10. Generally, an increase in the balances of...
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...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
What is a vendor? Definition of Vendor In the context of accounts payable, a vendor is a person or business that supplies goods or services to the company. Another term for vendor is supplier. The term vendor can also be...
What is a blank endorsement? In the case of a check payable to John Smith (the payee), a blank endorsement would be the signature of John Smith on the back side of the check without any other words above or below his...
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
documents containing the accrued revenues or expenses will be arriving and will be entered into the accounting records by the bookkeeper or the accounts payable clerk. Join PRO to Track Progress Mark the Question as...
account Accounts Payable should have a credit balance of $9,000. When the company buys more supplies on credit, the credit balance in Accounts Payable will be increased (with a credit entry). When the company pays one...
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...
Assume that a company is considering an investment that will provide net cash inflows of $1,000 at the end of each year for five years. The amount of cash that the company must pay at the beginning of the investment is...
and it is positioned immediately after current assets. The cash restricted for a long-term asset is not reported as part of the company’s current assets because the cash is not available to pay current liabilities....
What is carriage outwards? Definition of Carriage Outwards Carriage outwards refers to the transportation costs that a seller must pay when it sells merchandise with the terms FOB Destination. Carriage outwards is also...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
(or current ratio) is one indicator of a company’s ability to pay its current obligations. Example of Working Capital Ratio If a company has $600,000 of current assets and has $400,000 of current liabilities, its...
entitled Petty Cash when the petty cash fund is established. Example of Petty Cash Affecting Expenses Assume that the petty cash money is used to pay postage of $10. While the company incurs this cost at the time of...
pays for its purchases 90 days after it receives the goods. The corporation does not have sufficient money to purchase the raw materials, pay for the labor, and then wait 90 days to collect the receivable. The...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
of the preferred stock agreement requiring it to pay the $9 per share dividend. In turn, the stockholders will be deprived of receiving the $9 dividend in a 7% market. The call price has the effect of limiting how high...
What is solvency? Definition of Solvency I use the term solvency to mean a company is able to 1) pay its obligations when they come due, and 2) continue in business. Some people look to a company’s working capital to...
current ratio, but may not have liquidity. Hence, the inventory turnover ratio and the accounts receivable turnover ratio can provide insights as to a company’s ability to convert its current assets to cash in time to...
is guaranteeing that it will pay up to $500,000 if the insured company does not make its required payments for its purchases. We also use bond to mean that a company purchases insurance to protect itself from dishonest...
from Employees. Example of Employee Loan Assume an employee’s car needs an $800 repair and the employee does not have the money. The company employer agrees to give the employee an $800 advance to pay for the repair....
by discounting them with an appropriate interest rate The number of years it takes for a project’s cash flow to pay back the initial cash investment An assessment of risk along with the urgency of the project Join PRO...
suppliers. If you purchase an asset and the sales tax is required, the sales tax should be recorded as part of the cost of the goods or services received. For example, if you were required to pay sales tax on the new...
include: Billing for goods sold or services provided to clients Recording receipts from customers Verifying and recording invoices received from suppliers Paying suppliers Processing employees’ pay and the related...
Is the sales tax on merchandise purchased for resale included in inventory? In our state, sales tax is paid only by the end customer. In other words, a retailer does not pay sales tax on merchandise that is purchased for...
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...
are distributed the corporation must record an adjusting entry to accrue the $3,000 expense and liability. The journal entry will debit $3,000 to Repairs Expense, and will credit $3,000 to Accrued Expenses Payable....
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...
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