Accounting Equation Explained with Real Examples
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering … Read more »
Categories: Bookkeeping
Retained Earnings RE Formula, Features, Factors, Examples
Returned earnings is a term often used to refer to the earnings that a company has generated over time and then reinvested back into the business. Retained or returned earnings provide a clear indicator of a company’s long-term profitability and the capacity to self-finance its operations and growth. An increase in returned earnings suggests that … Read more »
Categories: Bookkeeping
Accounts Payable Journal Entry: Types and Examples
But because AP journal entries require you to post to other types of accounts, AP journal entries will also affect your income statement and cash flow statement. After the bill has been paid, an opposite transaction for debit from the accounts payable account and credit into the vendor’s bank account is created as follows. At … Read more »
Categories: Bookkeeping
Degree of Operating Leverage Definition, Formula, and Example
It is used to evaluate a business’ breakeven point—which is where sales are high enough to pay for all costs, and the profit is zero. A company with high operating leverage has a large proportion of fixed costs—which means that a big increase in sales can lead to outsized changes in profits. A company with … Read more »
Categories: Bookkeeping
Markup vs Margin: Definition, Calculator, and Formula
It’s calculated by dividing a company’s gross profit by its sales. A company’s gross margin is 35% if it retains $0.35 from each dollar of revenue generated. Understanding margin is crucial for investors and businesses because it directly impacts profitability and financial stability. Types of Profit Margins Two companies with similar gross profit margins could … Read more »
Categories: Bookkeeping
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