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What Is Unearned Revenue?

In accrual accounting, revenue recognition can become complicated, especially when companies sell subscription services or complete projects in installments. This is known as unearned revenue or deferred income accounting. There may be instances when payment is collected, before revenue can be recognized. In these situations, unearned revenue must be reported to remain compliant with U.S. …

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What is Contribution Margin? | Ratio Calculation

Analyzing a company’s income statement yields many insights about the efficiency and effectiveness of operations, especially as it relates to sales and variable costs. The contribution margin is a metric that illustrates profitability, before fixed expenses are factored into the equation. Below are additional details about the contribution margin, and how this important metric impacts …

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What is the Difference Between Gross Sales and Net Sales?

Revenue is among the most important financial metrics on the income statement and in comparative financial statements, but it’s not always straightforward to analyze. There is a difference between gross sales and net sales, and these differences give leaders insight into the efficiency and effectiveness of the sales and marketing process. Credit policies and other …

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Absorption Costing Income Statement

Manufacturing companies have choices in the way they determine and report their profits. Some choose to utilize the absorption costing income statement while others choose the variable costing income statement. Both income statements offer their own set of advantages and disadvantages. However, the absorption costing method conforms with the generally accepted accounting principles, and it offers a …

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