Under accrual accounting, companies recognize revenue when delivering goods or complete services, not receiving payments. This practice aligns directly with the revenue recognition principle—a fundamental part of GAAP. According to GAAP, revenue can only be recorded after it has been earned by fulfilling customer obligations. A good deferred revenue figure depends...
These workers might have insufficient training and might require more hours to complete a job. More labor hours would create an unfavorable labor efficiency variance, which could decrease your expected profit. Labor efficiency variance equals the number of direct labor hours you budget for a period minus the actual hours...
A high level of customer satisfaction indicates that a company is providing excellent service to its customers and is effectively managing its accounts receivable. Collection efficiency measures the percentage of outstanding invoices that are collected within a specified period, such as 30, 60, or 90 days. A higher collection efficiency...
Common stocks represent ownership in a company, offering voting rights and the potential for significant growth. These equity instruments allow shareholders to vote on corporate matters, such as board elections, making them integral to company governance. Companies issue these shares to raise capital, and their value often grows over time,...
The Statement of Activities is the Income Statement of a nonprofit organization. Unrestricted net assets are any funds your nonprofit has received from donors that have no rules or conditions attached to them, like a pure cash donation. The statement of functional expenses gives donors more details on how the...
Specifically, a K-1 reports income earned from a business—or, to be more specific, an owner’s share of the profit or loss of a business entity. Also like your 1099 or W-2, a Schedule K-1 is issued by the business that paid the income. The allocation of income and losses within...
In addition, they credit Accumulated Depreciation for the amount of depreciation accumulated on the asset up to the date of the write-off. A loss on disposal will reduce net income, while a gain on disposal will increase it. Financial reporting must clearly disclose the nature of these gains or losses...
