Search Results for: Financial Accounting
Accounting in the Headlines
What internal control principles were violated at a Texas school district that allowed its superintendent to embezzle more than $750,000? Beaumont Independent School District (BISD) is a public school district in Beaumont, Texas. It has three high schools, six middle schools, and 16 elementary schools, serving approximately 21,000 students. In February 2015, Patricia Lambert, former BISD Read more »
Common-Size Financial Statements
Analysts also use vertical analysis of a single financial statement, such as an income statement. Vertical analysis consists of the study of a single financial statement in which each item is expressed as a percentage of a significant total. Vertical analysis is especially helpful in analyzing income statement data such as the percentage of cost Read more »
Consolidated Financial Statements
Reporting for stock investments of more than 50 percent In recent years, many companies have expanded by purchasing a major portion, or all, of another company’s outstanding voting stock. The purpose of such acquisitions ranges from ensuring a source of raw materials (such as oil), to desiring to enter into a new industry, or seeking Read more »
Payroll Accounting Entries
Payroll liabilities In most business organizations, accounting for payroll is particularly important because (1) payrolls often are the largest expense that a company incurs, (2) both federal and state governments require maintaining detailed payroll records, and (3) companies must file regular payroll reports with state and federal governments and remit amounts withheld or otherwise due. Read more »
Accounting for Contingent Liabilities
Contingent liabilities. The existence of the liability is uncertain and usually the amount is uncertain because contingent liabilities depend (or are contingent) on some future event occurring or not occurring. Examples include liabilities arising from lawsuits, discounted notes receivable, income tax disputes, penalties that may be assessed because of some past action, and failure of Read more »
Glossary: Accounting for a Merchandising Enterprise
GLOSSARY Adjunct account Closely related to another account; its balance is added to the balance of the related account in the financial statements. Administrative expenses Expenses a company incurs in the overall management of a business. Cash discount A deduction from the invoice price that can be taken only if the invoice is paid within Read more »
Glossary: Completing the Accounting Cycle
GLOSSARY Accounting cycle Series of steps performed during the accounting period to analyze, record, classify, summarize, and report useful financial information for the purpose of preparing financial statements. The steps include analyzing transactions, journalizing transactions, posting journal entries, taking a trial balance and completing the work sheet, preparing financial statements, journalizing and posting adjusting entries, Read more »
Impacts of Inventory Errors on Financial Statements
Importance of proper inventory valuation A merchandising company can prepare accurate income statements, statements of retained earnings, and balance sheets only if its inventory is correctly valued. On the income statement, the cost of inventory sold is recorded as cost of goods sold. Since the cost of goods sold figure affects the company’s net income, Read more »
Accounting for Notes Receivable
Notes receivable Remember from earlier in the chapter, a note (also called a promissory note) is an unconditional written promise by a borrower to pay a definite sum of money to the lender (payee) on demand or on a specific date. On the balance sheet of the lender (payee), a note is a receivable. A customer Read more »
Internal Control and Accounting System Design
Internal control, as defined in accounting and auditing, is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization. It is a means by which an organization’s resources Read more »