When making managerial decisions by small businesses about overhead expenses, sales growth, profitability, and a myriad of operational objectives, income statement analysis is needed. A high level of detail is useful when reviewing operations, which is why the multi-step income statement is utilized. Expense line items, such as selling expenses and administrative expenses, are detailed, …
FAQ
When goods are shipped between suppliers and customers, freight charges are incurred from the freight services and must be expensed using the correct methodology, to remain consistent with U.S. Generally Accepted Accounting Principles. There are different classifications for freight out and freight in on the income statement. Below are details of each type of charge and …
What is the difference between freight in and freight out? Read More »
Cost of goods sold is a major line item on the income statement, and it’s comprised of inventory expenses such as the cost of goods manufactured. Understanding cost of goods manufactured is important for accounting and business decision-making purposes. The better this cost flow is controlled, the more profit a manufacturing company or manufacturing plant …
When gauging the performance of small businesses, the company’s income statement helps illustrate profitability, major total expenses, and business activities and trends. The level of detail needed on an income statement varies depending on the circumstances and report users. The single-step income statement format is the simplest format and has advantages relative to the multi-step statement, especially …
Prepaid expenses are common in any business. Some of these prepaid expenses include leases, monthly rent including first month’s rent, security deposits or advance rent, insurance policies with prepaid insurance or any other prepaid insurance expense. Let’s zone in on rent. When rent is paid upfront under accrual accounting vs cash basis, it is considered prepaid rent …