Accounting Tools

MAY 4, 2024

An income statement shows the profit or loss generated by a business over a specific period of time. From top to bottom, the template for an income statement is comprised of a header block, a revenue section, a cost of goods sold section, a general and administrative expenses section, and an other income and profit or loss section.

Financial Statements 52

Financial Statements Tax Expense Reports Payroll 52

Accounting Tools

APRIL 12, 2024

What is a Recognized Gain? A recognized gain occurs when an asset is sold for an amount greater than its purchase price. Depending on the nature of the asset and the circumstances of the sale , a recognized gain may qualify for capital gains treatment, which means that the income tax rate paid is significantly reduced.

Tax 40

Tax 40

Accounting Tools

JUNE 7, 2023

When to Recognize a Loss Contingency This is known as a loss contingency. You should recognize the expense when you can reasonably estimate the amount of the loss and it is probable that a liability has been incurred at the date of the financial statements.

Financial Statements 75

Financial Statements Auditing Accounting Accounting 75

Accounting Tools

MARCH 1, 2024

The reason for the difference is that tax rules may accelerate or delay the recognition of certain expenses that would normally be recognized in a reporting period. Examples of temporary differences are: Revenues or gains that are taxable either prior to or after they are recognized in the financial statements.

Tax 75

Tax Accounting Accounting Financial Statements 75

Accounting Tools

APRIL 16, 2024

Incorrect Expense Reserves A more subtle cooking the books practice is setting up expense reserves , such as the allowance for doubtful accounts , that do not reflect the actual loss rate. This means that the full amount of the sale is recognized, rather than just the commission on the sale.

Auditing 74

Auditing Invoicing Accounting Accounting 74

Accounting Tools

OCTOBER 28, 2023

Any variable lease payments that are not included in the lease liability Any impairment of the right-of-use asset Lessor Accounting for a Lease In a sales-type lease, the lessor is assumed to be selling a product to the lessee, which calls for the recognition of a profit or loss on the sale.

Accounting 75

Accounting Accounting Collections 75

Accounting Tools

FEBRUARY 7, 2024

Accounting for Hedges Hedge accounting involves matching a derivative instrument to a hedged item, and then recognizing gains and losses from both items in the same period. The net result of these gains and losses should be relatively small, as long as the hedging instrument was properly paired with the hedged item.

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Accounting Tools

NOVEMBER 7, 2023

Related Courses The Balance Sheet The Income Statement The Interpretation of Financial Statements What is a Profit and Loss Statement? A profit and loss statement aggregates the revenues , expenses , and profits or losses of a business.

Financial Statements 74

Financial Statements Accruals Tax Accounting Software 74

Accounting Tools

JUNE 14, 2023

It cannot be generated internally; it can only be recognized through the acquisition of another business. The acquirer must recognize goodwill as an asset as of the acquisition date. If so, the amount of the impairment is recognized as a loss, which reduces the carrying amount of the goodwill asset.

Accounting 75

Accounting Accounting 75

Accounting Tools

JUNE 9, 2023

An asset disposal may require the recording of a gain or loss on the transaction in the reporting period when the disposal occurs. Any remaining difference between the two is recognized as either a gain or a loss. The gain or loss is calculated as the net disposal proceeds, minus the asset’s carrying value.

Auditing 75

Auditing Accounting Accounting 75

Accounting Tools

NOVEMBER 7, 2023

Related Courses Accounting for Income Taxes How to Account for Income Taxes The essential accounting for income taxes is to recognize tax liabilities for estimated income taxes payable, and determine the tax expense for the current period. The concepts are noted below. Assets whose tax basis is reduced by investment tax credits.

Tax 75

Tax Financial Statements Accounting Accounting 75

Accounting Tools

MAY 10, 2024

There is no recognition of a gain or loss on the conversion transaction. The Market Value Approach An alternative approach to recording a bond conversion is the market value approach, under which a gain or loss on the transaction may be recognized. This shift moves the bond liability into the equity part of the balance sheet.

Accounting 40

Accounting Accounting 40

Accounting Tools

SEPTEMBER 12, 2023

Once a business revalues a fixed asset, it carries the fixed asset at its fair value , less any subsequent accumulated depreciation and accumulated impairment losses. If a revaluation results in a decrease in the carrying amount of a fixed asset, recognize the decrease in profit or loss.

Financial Reporting 40

Financial Reporting Accounting Accounting 40

Accounting Tools

JULY 26, 2023

Accruals Concept Revenue is recognized when earned, and expenses are recognized when assets are consumed. This concept means that a business may recognize revenue, profits and losses in amounts that vary from what would be recognized based on the cash received from customers or when cash is paid to suppliers and employees.

Financial Statements 76

Financial Statements Accruals Accounting Accounting 76

Accounting Tools

AUGUST 25, 2023

Related Courses Corporate Finance GAAP Guidebook What is a Holding Loss? A holding loss is a reduction in the value of an asset that continues to be owned. Depending on the circumstances, a holding loss may be recognized by the holder of the asset. Related Articles Holding Gain Holding Period

Corporate Finance 40

Corporate Finance 40

Accounting Tools

NOVEMBER 3, 2023

The need for a valuation allowance is especially likely if a business has a history of letting various carryforwards expire unused, or it expects to incur losses in the next few years. Accordingly, Spastic recognizes a valuation allowance in the amount of $100,000 that fully offsets the deferred tax assets.

Tax 75

Tax Accounting Accounting 75

Accounting Tools

AUGUST 27, 2023

Accounting for a Cash Flow Hedge The accounting for a cash flow hedge for the hedging item is to recognize the effective portion of any gain or loss in other comprehensive income , and recognize the ineffective portion of any gain or loss in earnings.

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Accounting Tools

MARCH 5, 2024

Expenses are deducted from revenues to arrive at the profit or loss generated by a business. This means that the payment occurs (in January) before any expense is recognized (in February). In this case, it recognizes the cost of goods sold expense for the computer before it issues a payment on the associated computer parts.

Computation 40

Computation Bookkeeping Payroll Tax 40

Accounting Tools

JUNE 20, 2023

Organizations tend to maintain tight controls over expenditures, to keep from incurring losses. A cap limit is established in order to keep an organization from recognizing low-cost items as fixed assets (which can be time consuming).

Bookkeeping 75

Bookkeeping Invoicing Accounting Accounting 75

Accounting Tools

MAY 10, 2024

If events take place before the balance sheet date that trigger a lawsuit, and lawsuit settlement is a post balance sheet event, consider adjusting the amount of any contingent loss already recognized to match the amount of the actual settlement.

Financial Statements 40

Financial Statements Collections Invoicing Accounting 40

Accounting Tools

DECEMBER 20, 2023

Accounting for a Factoring Arrangement Essentially, a factoring transaction is recorded as a sale of the receivables, and a gain or loss (usually a loss) is recognized on the receivable transferred to the factor.

Accounts Receivable 40

Accounts Receivable Accounts Receivable Account Receivables Accounting 40

Accounting Tools

DECEMBER 22, 2023

This is particular concern when the cost of the materials required to assemble the product is substantial, so the seller would incur a notable loss if the buyer were not to pay. Related Articles Accounting for Gift Cards How to Account for Accrued Rent How to Account for Prepayments How to Reconcile an Account

Accounting 75

Accounting Accounting Reconciling Bookkeeping 75

Accounting Tools

SEPTEMBER 2, 2023

Recognize Interest Income Set a policy for recognizing interest income on a receivable basis, which can accelerate the recognition of this income from when it would otherwise be recognized upon the receipt of cash. Sell Assets If an asset has appreciated in value, sell it now to recognize a taxable gain.

Tax 40

Tax 40

Accounting Tools

DECEMBER 23, 2023

Under the matching principle , expenses are typically recognized in the same period in which related revenues are recognized. Examples of operating expenses are the cost of goods sold and marketing expenses, while examples of non-operating expenses are interest expense and lawsuit losses.

Accruals 75

Accruals Bookkeeping Accounts Payable Accounts Payable 75

Accounting Tools

SEPTEMBER 2, 2023

Related Courses Partnership Accounting Partnership Tax Guide How Partnerships are Taxed The essential concept of partnership taxation is that all profits and losses flow through to the partners in the business, who are then responsible for these amounts. Thus, the business entity does not pay income taxes.

Accruals 40

Accruals Tax Accounting Accounting 40

Accounting Tools

SEPTEMBER 25, 2023

This change is comprised of net income or net loss , and other comprehensive income. Related Articles Other Comprehensive Income (podcast) Other Comprehensive Income Reclassifications (podcast)

40

40

Accounting Tools

NOVEMBER 7, 2023

An expired cost is a cost that has been recognized as an expense. An expired cost may also be construed as the total loss in value of an asset. A cost for which a portion is still recorded as an asset and a portion has been recognized as an expense can be considered a partially expired cost.

Cost Accounting 40

Cost Accounting Accounting Accounting 40

Accounting Tools

NOVEMBER 9, 2023

A deductible temporary difference is a temporary difference that will yield amounts that can be deducted in the future when determining taxable profit or loss. Related Articles Permanent Differences in Tax Accounting Timing Differences

Tax 40

Tax Accounting Accounting 40

Accounting Tools

JUNE 20, 2023

In these situations, the sham transaction should not be recognized in the financial statements. By doing so, both entities recognize revenue, when in fact no real revenue generation occurs that would result in a change in profits. The swapping of bandwidth capacity by different Internet and phone service providers.

Financial Statements 75

Financial Statements Tax Accounting Accounting 75

Accounting Tools

JULY 16, 2023

Instead, the accounting standards mandate that a business cannot recognize any internally-generated intangible assets (with some exceptions), only acquired intangible assets. Also, the accounting standards state that a sudden loss in the value of an asset can trigger an impairment charge, which can adversely impact profits.

Financial Statements 75

Financial Statements Accounting Accounting 75

Accounting Tools

OCTOBER 12, 2023

Older receivables may be assigned a higher probability of loss , while newer ones are assigned a lower probability. For example, receivables less than 30 days old may be assigned a loss probability of 2%, while those at least 90 days old are assigned a loss probability of 40%.

Accounts Receivable 75

Accounts Receivable Accounts Receivable Account Receivables Accruals 75

Accounting Tools

JANUARY 26, 2024

The matching principle requires that revenues and any related expenses be recognized together in the same reporting period. You should record the commission expense in January, so that the expense is recognized in the same month as the associated sale. What is the Matching Principle?

Accruals 75

Accruals Bookkeeping Financial Statements Invoicing 75

Accounting Tools

JUNE 15, 2023

Any unrealized holding gains and losses are to be recorded in operating income. Any unrealized holding gains and losses are to be recorded in other comprehensive income until they have been sold. Realized Gains and Losses An important concept in the accounting for investments is whether a gain or loss has been realized.

Accounting 40

Accounting Accounting Tax 40

Accounting Tools

SEPTEMBER 1, 2023

Accounting for a Direct Financing Lease Under this arrangement, the lessor recognizes the gross investment in the lease and the related amount of unearned income. Unearned income is recognized in earnings over the term of the lease. If the residual value has increased, do not recognize a gain.

Accounting 40

Accounting Accounting 40

Accounting Tools

AUGUST 2, 2023

Related Articles Statement of Owner’s Equity Statement of Retained Earnings Statement of Shareholders’ Equity Complete the statement, and verify that the beginning and ending balances in it match the general ledger, and that the aggregated line items within it add up to the ending balances for all columns.

General Ledger 74

General Ledger Financial Statements Accounting Accounting 74

Accounting Tools

SEPTEMBER 25, 2023

A contingent gain is not recognized in the financial statements until the transaction has been settled. Related Articles Contingent Liability Contingent Loss Related Courses Accountants’ Guidebook What is a Contingent Gain? A contingent gain is a potential increase in assets that has not yet occurred.

Financial Statements 40

Financial Statements Accounting Accounting 40

Accounting Tools

JULY 18, 2023

When recognizing payroll expenses , debit the wages expense and payroll tax expense accounts, and credit the cash account. To recognize depreciation expense , debit depreciation expense and credit accumulated depreciation. There may also be a gain or loss on the derecognition. Payroll entry. Depreciation entry. Petty cash entry.

Petty cash 75

Petty cash Accounts Payable Accounts Payable Payroll 75