Earning power means the normal level of income to be obtained in the future. Earning power differs from actual net income by the amount of irregular revenues, expenses, gains, and losses. Users are interested in earning power because it helps them derive an estimate of future earnings without the “noise” of irregular items.
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Under the percentage-of-receivables basis, management estimates what percentage of receivables will result in losses from uncollectible accounts.
- Closing entries
Closing entries referred as entries that made at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner’s equity account...
Entering transaction data in the journal is known as journalizing. Companies make separate journal entries for each transaction.
- Net income & net loss
Net income results when revenues exceed expenses. A net loss occurs when expenses exceed revenues.
- Adjusted trial balance
Adjusted trial balance is a list of accounts and their balances after the company has made all adjustments. An adjusted trial balance shows the balances of all accounts...
- Production budget
Production budget is a projection of the units that must be produced to meet anticipated sales. Production requirements are determined form the following formula.
- Monetary unit assumption
The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money.