Contra Expense Account

Contra means against. In bookkeeping terms, a contra expense account refers to an account which is offset against an expense account.

As an expense account is normally a debit balance, a contra expense account will normally be a credit balance. When the two balances are offset against each other they show the net balance of both accounts.

Last modified November 6th, 2016 by Team
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Consumable Supplies Expense Recorded

Following a physical count, a business has consumable supplies on hand of 350. The accounting records before adjustment show supplies on hand of 500, and an adjusting entry is needed to record the amount of supplies used for the period.

Last modified November 6th, 2016 by Team
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Effect of Inventory Errors

Errors in inventory impact the balance sheet and income statement of a business, but have no effect on its operating cash flow. In the cash flow the change in net income as a result of the inventory error, is compensated for by a change in the movement on working capital.

Last modified November 2nd, 2018 by Team
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Accrued Income Tax

A business has an estimated annual income tax expense of 14,000 due of profits for the accounting period. A demand for the amount has not yet been received from the tax authorities, and the expense has not been recorded in the accounting records. An accrued income tax adjusting entry is made in the accounting records.

Last modified July 27th, 2018 by Team
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Vertical Analysis Calculator

A vertical analysis shows each line of financial statements as a percentage of a base line item so that comparisons can be made. This free Excel calculator produces a vertical analysis of an income statement in relation to total revenue, and of a balance sheet in relation to total assets.

Last modified September 28th, 2018 by Team
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Received Utilities Bill

A utilities bill will be recorded as an expense to the business. As the business is given credit by the supplier, the other side of the accounting equation is a liability to the supplier (accounts payable).

Last modified December 5th, 2018 by Team
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Purchase Services on Account

Purchasing services on account will be recorded as an expense to the business. As the services are purchased on account, the other side of the accounting equation is a liability to the supplier (accounts payable).

Last modified October 10th, 2018 by Team
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Percentage of Completion Method

The percentage of completion method is used to calculate the amount of revenue and income that can be recognized by a business on a long term project. The method is in accordance with the matching or accruals concept of accounting, and ensures that the costs incurred on the project are matched to the revenues arising from that project.

Last modified August 18th, 2017 by Team
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CVP Income Statement

A CVP income statement rearranges the traditional format to show variable expenses, contribution margin, and fixed expenses allowing a business to make cost volume profit decisions.

Last modified November 6th, 2016 by Team
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Product and Period Costs

A business needs to separate period and product cost as product costs are included as part of the inventory until the product is sold, whereas period costs are treated as an expense in the income statement in the period in which they are incurred.

Last modified November 6th, 2016 by Team
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Cash Discount Received

A business has been invoiced 500 for goods and takes a 2% cash settlement discount for early payment.

The original invoice would have been posted to accounts payable, so the balance before settlement on the suppliers account is 500. A 2% discount on 500 is 10, and the amount of cash the customer pays is therefore 490.

Last modified July 21st, 2018 by Team
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Vertical Analysis

Vertical analysis definition: A technique of analyzing financial statements by restating each line item (e.g. sales and marketing expenses) as a percentage of another base line item (e.g. Revenue). The horizontal analysis reports are not required by Accounting Standards, and are used more as a management tool rather than a formal reporting document.

Last modified November 6th, 2016 by Team
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