in each accounting period and report interest payable for any unpaid but incurred interest up to the end of the accounting period. Future interest is not recorded as a liability. The bank must report interest income (or...
in each accounting period and report interest payable for any unpaid but incurred interest up to the end of the accounting period. Future interest is not recorded as a liability. The bank must report interest income (or...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
and paid to the employees on Friday, January 8. The amount of the wages for the five days of December 27 through December 31 are calculated to be $5,000. In addition, the retailer incurred payroll taxes and fringe...
How can a company have a profit but not have cash? Definition of Profit Under the accrual basis of accounting, profit is the amount of revenues earned minus the amount of expenses incurred. Note that revenues are not...
payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
. An unrelated customer asks the company to inform them of the price for constructing a specific residence. The company prepares a detailed calculation of the final price that the customer will pay. The price will...
What is a sunk cost? Definition of Sunk Cost A sunk cost is a cost that was incurred in the past and cannot be undone. Since most transactions cannot be undone, most amounts spent in the past are sunk. A past or sunk...
the financial statements the gross wages that were earned by the employees (and incurred by the employer) during the accounting period. [Under the cash basis of accounting, the employer’s financial statements will...
. This is needed because the accrual basis of accounting requires the income statement to show the revenues that were earned (not the money actually received) and the expenses incurred or matched to the accounting period...
rate is 5.1% and there was no accrued interest. As a result, the investors paid $99.5 million for the bonds. The corporation also incurred $1 million of bond issue costs which were paid from bonds’ proceeds. The entry...
of the goods that were sold during the current period, and the following which also occurred during the current period: salaries earned by the company’s employees, interest expense incurred, commissions earned by...
on the statement of cash flows.) The interest on the loan will be reported as expense on the income statement in the periods when the interest is incurred. Example of a Loan Principal Payment Let’s assume that a...
or goods have been received. However, the vendors’ invoices have not yet been received and the exact amount is not yet known. The company is required to estimate the amount since the estimated amount is far better...
What is the difference between expenses and payments? Definition of Expenses and Payments Under the accrual method of accounting, expenses are costs that have been used up or have been incurred in the process of earning...
What are accruals? Definition of Accruals The accounting and bookkeeping term accruals refers to adjustments that must be made before a company’s financial statements are issued. Accruals involve the following types of...
sold divided by the average inventory 11. Which of the following is a cost of holding inventory? Select... Preparing the purchase order Risk of obsolescence Receiving and stocking the goods ordered from a supplier 12....
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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 Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts 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...
administrative functions. This depreciation will be reported on the manufacturer’s income statement in the section containing its SG&A expenses. Depreciation of equipment and building used in the manufacturing of...
the company is manufacturing between 300,000 and 500,000 units, it needs salaried managers earning $400,000 per year. Below 300,000 units of output, some of the salaried manager positions would be eliminated. Above...
of direct and indirect manufacturing employees. If for the month of January the direct labor is $40,000, then $2,000 of the worker comp cost should be included as direct labor. If indirect labor for January is $60,000...
to increase the total amount of its fixed costs . Example of Relevant Range Let’s assume that a manufacturer’s monthly production volume is consistently between 10,000 to 13,000 units of product requiring between...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
-in-process, finished goods, manufacturing and packaging supplies Office supplies Prepaid expenses, such as insurance premiums which have not yet expired Advance payments on future purchases Join PRO to Track Progress...
a bank receives from a depositor. Since the bank is not earning this money, the amount is recorded by the bank with a debit to Cash and a credit to Customer Deposits. Example of Customer Deposit Let’s assume that Ace...
shipment. Assume that XYZ Distributors Inc (XYZ) sells only the Premier brand of water heaters. XYZ receives an order for 40 of the water heaters from a condominium developer located 30 miles away. XYZ then places an...
What is the rationale for not reporting plant assets at their liquidation value? I will assume that the plant assets‘ liquidation values are higher than the present carrying values when answering your question. Plant...
one type of inventory, namely merchandise. Manufacturers will have three or four categories of inventories: Raw materials Work-in-process Finished goods Manufacturing and packaging supplies Manufacturers are required to...
of accounting, net income is based on the following: revenues earned during the accounting period (not in the period when the money is received) minus the expenses incurred in the accounting period (not in the period...
December 31 that debits Commissions Expense for $6,000 and credits Commissions Payable for $6,000. (Without the matching principle and the adjusting entry, the company might report the $6,000 of commissions expense in...
sales are eliminated when NEP’s and MGC’s income statements are combined to become the consolidated income statement.) The consolidated income statement will also report all the expenses that were incurred outside...
Where are accruals reflected on the balance sheet? Definition of Accruals The accrual of expenses and liabilities refers to expenses and/or liabilities that a company has incurred, but the company has not yet paid...
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