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What happens to net income if inventory is understated?
If inventory is understated, net income is also understated because cost of goods sold will be overstated
What is revenue minus net income?
EXpense
What does Revenue less expense equal?
net income
How does a debit to an expense account ultimately affect retained earnings?
A debit to an expense account increases total expenses, which reduces net income for the period. Since net income is a key component in calculating retained earnings, a decrease in net income ultimately leads to a reduction in retained earnings. Thus, higher expenses result in lower retained earnings at the end of the accounting period.
When expense is accrued what is the effect on assets and income respectively?
When an expense is accrued, it increases liabilities on the balance sheet, as the company acknowledges an obligation to pay in the future. This does not directly affect assets at the time of accrual. However, it reduces net income on the income statement because the expense is recognized in the period it is incurred, even though cash has not yet been paid out. Overall, the accrual of expenses leads to a decrease in equity due to the lower net income.
A company's month-end adjusting entry for Insurance Expense is 1000 If this entry is not made then expenses are understated by 1000 and net income is overstated by 1000?
Yes this is right statement as if some expenses are forgot to record it overstated the net income and reduces the expenses but in actual there is less net income then shown in income statement.
Failure to record a liability will probably?
result in a overstated net income
If the amount of uncollectible account expense is understated at year end?
net Accounts Receivable will be overstated.
Does rent expense affect net income?
Yes all expenses reduces the net income so does rent expense also reduce the net income of company.
What happens to net income if inventory is understated?
If inventory is understated, net income is also understated because cost of goods sold will be overstated
What does depreciation have to do with net income?
The total depreciation for an accounting period is recorded as a depreciation expense on the income statement. This reduces net income, which is also known as the bottom line. Net income equals revenues minus expenses. Higher depreciation expense contributes to higher total expenses, which results in lower net income. Companies with mostly older assets that have been fully depreciated and companies with few long-lived assets benefit from low depreciation expense and higher net income.
What effect does depreciation expense have on net income and cash flow?
Depreciation Expense reduces net income and has no effect on cash flow.
What is revenue minus net income?
EXpense
What does Revenue less expense equal?
net income
How does a debit to an expense account ultimately affect retained earnings?
A debit to an expense account increases total expenses, which reduces net income for the period. Since net income is a key component in calculating retained earnings, a decrease in net income ultimately leads to a reduction in retained earnings. Thus, higher expenses result in lower retained earnings at the end of the accounting period.
What accounts are in net income?
Included in net income are the following: 1. All revenue-related accounts, e.g. Sales, service revenue, interest income, rental income, etc. 2. All expense-related accounts, e.g. Purchases, Depreciation, Rental expense, Maintenance expense, Amortization, Utilities expenses, etc. Net income = Revenues - Expenses
Where do the Maintenance expense go on the financial statement?
Maintence Expense is just like any other expense and will be reported on the income statement and deducted from Gross Income to obtain Net Income...
