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...
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...
of the corporation, they must comply with generally accepted accounting principles (GAAP or US GAAP). GAAP includes underlying concepts such as the historical cost principle, matching principle, revenue recognition,...
divided by $1,000,000). If the cost of goods sold amount is $780,000 it will be presented as 78% ($780,000 divided by sales of $1,000,000). If interest expense is $50,000 it will be presented as 5% ($50,000 divided by...
. If the vendor authorized an allowance of $100, the amount due if paid within 10 days is $__________. 15. The __________-way match in accounts payable involves the vendor’s invoice, the company’s purchase order and...
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...
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...
of a corporation’s earnings to its cash flows from __________ activities is often used to assess the quality of earnings. Select... financing investing operating 3. A highly profitable corporation with $30 million in...
be included with a company’s financial statements. Mark as wrong Mark as right materiality This accounting guideline allows large corporations to issue financial statements with amounts rounded to the nearest thousand...
. The merchandise held by a retailer is usually in the Inventory account at which amount? Select... Cost Sales value 22. Which inventory system will reduce the general ledger account Inventory and increase the general...
... Asset Liability Expense 17. A company with a calendar year and calendar months is more likely to need adjusting entries for which group of employees? Select... Hourly employees paid weekly Salaried employees paid on...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
for Questions 25 - 28: Supplies are a significant expense and a significant asset of a local mail order business. At the beginning of the year, its account Supplies Inventory reported a cost of $12,000. During the year...
What is practical capacity? Definition of Practical Capacity Practical capacity is a manufacturer’s level of output (often expressed in machine hours, barrels, pounds, etc.). Practical capacity is less than its...
What is boilerplate? In business, boilerplate is a term to describe the standard wording that is contained in warranties and other documents. Generally, the information that is boilerplate is not subject to change....
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...
and equipment. This classification includes land, buildings, machinery, equipment, vehicles, fixtures, etc. that are used in the business. These assets are reported at cost and the contra asset accumulated depreciation...
electricity to customers for up to one month before it reads the customers’ meters, calculates the bills and records the billings as revenues and accounts receivable. As a result, the electric utility will have up to...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the...
of goods and/or the providing of services Expenses, which include the cost of goods sold, SG&A expenses, and interest expense Gains and losses, such as the sale of a noncurrent asset for an amount that is...
of the balance sheet, reports assets at their original cost less accumulated depreciation. However, the current value of some of these assets may be much greater. Some intangible assets such as trade names, patents,...
hours). Improvements in technology can also result in time and cost reductions beyond those in the learning curve. For example, software may become available to assist in the design and coding, computer processing...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
could be less than the cost of not filing a customer’s order on time or having to stop its production line. Example of Safety Stock Assume that a company uses the economic order quantity (EOQ) model to determine the...
: $10,000 of assets = $0 of liabilities + $10,000 of owner’s equity. Next, let’s assume the company purchases equipment at a cost of $3,000 and signs a promise to pay the $3,000 within six months. Now the company’s...
account? A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance in an asset account is contrary to the normal or...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold. The total capex amount that was spent in a recent accounting period is reported in the statement...
impairment test at least once per year. (Beginning in 2015, private companies may opt to amortize goodwill generally over a 10-year period and thereby minimize the cost and complexity involved with testing for...
) have not been reviewed or audited and therefore the accountant does not offer an opinion or any assurances on the financial statements. Compilations allow companies without an accountant to have financial statements...
How do you record a payment for insurance? Definition of Payment for Insurance A company’s property insurance, liability insurance, business interruption insurance, etc. often covers a one-year period with the cost...
on the meters’ readings. The retailer receives its first utility bills on January 8th and must remit the amount by February 2. Under the accrual basis of accounting, the retailer’s income statement for the month of...
the adjusting entry will debit Insurance Expense for $400 and will credit Prepaid Insurance for $400 Either method for recording prepaid expenses could be used as long as the asset account balance is equal to the...
method) or Inventory (perpetual method) for the cost of the goods or merchandise received, and 2) credit a current liability account such as Accrued Liabilities. After the financial reporting for the accounting period...
for $10,000. After recording the depreciation to the date of the sale, the car’s book value is $6,000 (cost of $28,000 minus accumulated depreciation of $22,000). The company will have proceeds of $10,000 and a gain...
of production method, let’s assume that a company has a machine with a cost of $500,000 and a useful life that is expected to end after producing 240,000 units of a component part. Further, the machine’s salvage...
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