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Net of discount definition — AccountingTools

For example, a coupon offers 20% off the $100 retail price of a product, net of discounts. Other applicable discounts are a 10% Christmas discount and a 5% volume discount. Thus, the other two discounts are applied first to arrive at an $85 price for the product, after which the 20% coupon offer is applied, resulting in a $17 discount related

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Accounting for sales discounts — AccountingTools

A sales discount is a reduction in the price of a product or service that is offered by the seller, in exchange for early payment by the buyer. A sales discount may be offered when the seller is short of cash, or if it wants to reduce the recorded amount of its receivables outstanding for other reasons. An example of a sales discount is for the

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Cash discount definition — AccountingTools

What is a Cash Discount? A cash discount is a reduction in the amount of an invoice that the seller allows the buyer. This discount is given in exchange for the buyer paying the invoice earlier than its normal payment date. There are two reasons why a seller might make this offer: To obtain ea

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Sales promotion definition — AccountingTools

Coupons. This is the distribution of a discount offer, either in the form of a reduction from the list price, or as a volume discount where additional units purchased are less expensive or free. Demonstrations. On-site demonstrations can be used to show the features of a product to potential customers. Finance deals.

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Types of bonds — AccountingTools

A coupon bond contains attached coupons that investors send to the issuer; these coupons obligate the company to issue interest payments to the holders of the bonds. A coupon bond is easier to transfer between investors, but it is also more difficult to establish ownership of the bonds. There are many types of bonds.

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Membership fee accounting — AccountingTools

Example of Accounting for Membership Fees. Viking Fitness charges a $500 initiation fee and $700 for one year of membership, which gives members access to its health clubs. Viking should recognize the initiation fees ratably over the initial one year of membership, which means that it can recognize a total of $100 of revenue per month in the

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Accounting for gift cards — AccountingTools

What is the Accounting for Gift Cards? The essential accounting for gift cards is for the issuer to initially record them as a liability, and then as sales after the card holders use the related funds. There are varying treatments for the residual balances in these cards, as noted below.

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Cash fraud schemes — AccountingTools

The person delivering cash deposits to the bank can remove cash from the pouch on the way to the bank. This issue can be mitigated by handing off the cash to an armored truck for delivery. It can also be detected after-the-fact by comparing the deposit slip from the bank to the cashier's record of cash received. Petty cash removal.

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Types of dividends — AccountingTools

The cash dividend is by far the most common of the dividend types used. On the date of declaration, the board of directors resolves to pay a certain dividend amount in cash to those investors holding the company's stock on a specific date. The date of record is the date on which dividends are assigned to the holders of the company's stock.

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Warranty accounting — AccountingTools

Overview of Warranty Accounting. A business may have a warranty policy, under which it promises customers to repair or replace certain types of damage to its products within a certain number of days following the sale date. If the company can reasonably estimate the amount of warranty claims likely to arise under the policy, it should accrue an expense that reflects the cost of these

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Net sales definition — AccountingTools

Net sales is total revenue, less the cost of sales returns, allowances, and discounts. This is the primary sales figure reviewed by analysts when they examine the income statement of a business. The amount of total revenues reported by a company on its income statement is usually the net sales figure, which means that all forms of sales and

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Run rate definition — AccountingTools

The run rate concept refers to the extrapolation of financial results into future periods. For example, a company could report to its investors that its sales in the latest quarter were $5,000,000, which translates into an annual run rate of $20,000,000. It is based on the assumption that current results will continue into the future.

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CPE Courses — AccountingTools

AccountingTools is an IRS Approved Continuing Education Provider. We are compliant with the requirements for continuing education providers (as described in sections 10.6 and 10.9 of the Department of Treasury’s Circular No. 230 and in other IRS guidance, forms, and instructions).

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Why companies issue bonds — AccountingTools

Why companies issue bonds. January 19, 2021. / Steven Bragg. A corporation has a choice of raising money by selling shares or by issuing bonds. The issuance of bonds essentially creates a loan between a group of investors and the corporation. There are specific reasons why the issuance of bonds is a better choice than issuing shares.

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How to account for a patent — AccountingTools

A patent is considered an intangible asset; this is because a patent does not have physical substance, and provides long-term value to the owning entity. As such, the accounting for a patent is the same as for any other intangible fixed asset, which is:. Initial recordation.Record the cost to acquire the patent as the initial asset cost. If a company files for a patent application, this cost

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Product life cycle definition — AccountingTools

Coupons and other discount deals may be offered to spur demand from customers. A maintenance level of marketing expenditures is used to ensure that customers are aware of the product offerings. There is an increased focus on cost reduction throughout the product line

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How to calculate the effective interest rate — AccountingTools

The effective interest rate is the usage rate that a borrower actually pays on a loan.It can also be considered the market rate of interest or the yield to maturity.This rate may vary from the rate stated on the loan document, based on an analysis of several factors; a higher effective rate might lead a borrower to go to a different lender.These factors are:

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Accounting for bonds — AccountingTools

Accounting for Bond Interest Payments. The recorded amount of interest expense is based on the interest rate stated on the face of the bond. Any further impact on interest rates is handled separately through the amortization of any discounts or premiums on bonds payable, as discussed below.The entry for interest payments is a debit to interest expense and a credit to cash.

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Bond definition — AccountingTools

What is a Bond? A bond is a fixed obligation to pay that is issued by a corporation or government entity to investors.Bonds are used to raise cash for operational or infrastructure projects. Bonds usually include a periodic coupon payment, and are paid off as of a specific maturity date.There are a number of additional features that a bond may have, such as being convertible into the stock of

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Unearned revenue definition — AccountingTools

A variation on the revenue recognition approach noted in the preceding example is to recognize unearned revenue when there is evidence of actual usage. For example, Western Plowing might have instead elected to recognize the unearned revenue based on the assumption that it will plow for ABC 20 times over the course of the winter.

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Construction Accounting — AccountingTools

Construction Accounting (CPE Course) CPE Credit: 11 hours. Course Type: Downloaded PDF materials with online test. Price (with PDF Textbook): $75. Purchase Course. Course Description. This course addresses every aspect of the accounting for a construction business. The intent is to not only explain accounting concepts, but also provide examples

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The difference between gross sales and net sales

The difference between gross sales and net sales. Gross sales are the grand total of all sale transactions reported in a period, without any deductions included within the figure. Net sales are defined as gross sales minus the following three deductions: Sales allowances. A reduction in the price paid by a customer, due to minor product defects.

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Gross revenue definition — AccountingTools

Gross revenue is the total amount of sales recognized for a reporting period, prior to any deductions. This figure indicates the ability of a business to sell goods and services, but not its ability to generate a profit. Deductions from gross revenue include sales discounts and sales returns. When these deductions are netted against gross

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Prepaid asset definition — AccountingTools

What is a Prepaid Asset? A prepaid asset is an expense that has already been paid for, but which has not yet been consumed. The concept most commonly applies to administrative activities, such as prepaid rent or prepaid advertising.A prepaid asset appears as a current asset on an organization's balance sheet, assuming that it is expected to be consumed within one year.

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Provision definition — AccountingTools

What is a Provision? A provision is the amount of an expense that an entity elects to recognize now, before it has precise information about the exact amount of the expense. For example, an entity routinely records provisions for bad debts, sales allowances, and inventory obsolescence.. Accounting for a Provision. A provision should be recognized as an expense when the occurrence of …

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Deferred revenue definition — AccountingTools

Deferred revenue is a payment from a customer for future goods or services. The seller records this payment as a liability, because it has not yet been earned. Deferred revenue is common among software and insurance providers, who require up-front payments in exchange for service periods that may last for many months.

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Equipment trust certificate definition — AccountingTools

An equipment trust certificate (ETC) is a debt that is secured by an asset. While a borrower is paying off the debt, the title to the asset is held in trust. The trust holds title to the asset, and investors buy trust certificates, thereby providing the trust with sufficient capital to buy the asset. Once the debt is paid off, the title is

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Why buy a bond at a premium

An investor would buy a bond at a premium price when the bond’s stated interest rate is higher than the market interest rate.A premium bond is a bond whose current selling price on the open market is higher than its par (or stated) value. This situation arises when the stated interest rate on the face of the bond is higher than the market interest rate currently in existence.

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Articles — AccountingTools

Step 2. Evidence Phase. Includes carrying out the indicated procedures in sufficient detail to build a case against those involved, as well as to determine the amount of the loss incurred. Step 3. Reporting Phase. Includes the findings of the investigation, an explanation of how the fraud was conducted, and recommendations for how to keep this

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