A closing entry is an accounting journal entry that is used to shift the balance of temporary accounts to permanent accounts. This is done at the end of an accounting period to prepare the financial statements. The closing entries are made after the adjusting entries have been made. There are four types of closing entries: … Read more
The ratable accrual method is an accounting method used to allocate income and expenses over a period of time. This method is commonly used for businesses that have a large amount of inventory or receivables. Under this method, income and expenses are divided into equal portions and recorded in the accounting records on a regular … Read more
A fuel tax credit is a tax credit that is available to businesses and individuals in the United States who purchase fuel for use in their business or personal vehicles. The credit is based on the amount of fuel purchased and the type of fuel purchased. There are two types of fuel tax credits: the … Read more
“Earnings management” is the deliberate manipulation of financial reporting in order to achieve a desired result. This may be done in order to meet certain financial targets, such as increasing earnings per share, or to smooth out earnings volatility. Often, earnings management is done within the bounds of generally accepted accounting principles (GAAP), but it … Read more
An interest expense is the cost that a business incurs when borrowing money. The expense is calculated as a percentage of the outstanding principal amount of the loan. The interest expense is recorded on the income statement as a reduction to revenue. The interest expense definition can be broken down into two parts: the cost … Read more
Progress billings are a type of invoicing that is commonly used in construction and other project-based businesses. Rather than billing for the entire project at once, progress billings allow businesses to bill their clients for each phase of the project as it is completed. This can be helpful in managing cash flow, as businesses only … Read more
In accounting, normal profit is defined as the revenue that a business needs to generate in order to cover its costs of operation. This includes both fixed costs (such as rent and utilities) and variable costs (such as the cost of goods sold). Normal profit is also sometimes referred to as “break-even point,” because it … Read more
What is relevant cost in accounting, and why is it important? Which of the following is not a relevant cost? The opportunity cost of using land to build a factory is not a relevant cost when deciding whether or not to build the factory. The opportunity cost is the cost of the next best alternative … Read more
Conventional cash flow is the net cash flow from operating activities after adjusting for certain non-cash items. Conventional cash flow is used to measure a company’s ability to generate cash from its operating activities. The adjusted items typically include items such as depreciation and amortization. What is another name for cash flow statement? The cash … Read more
Required Information and Example. A pro forma invoice is a document that provides an estimate of the goods or services to be supplied, and is usually provided in advance of the actual delivery. The invoice should include all relevant information such as the price of the goods or services, the date of delivery, and a … Read more
