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Contra-accounts are accounts with negative balances that offset other balance sheet accounts. Examples are accumulated depreciation (offset against fixed assets), and the allowance for bad debts (offset against accounts receivable). Deferred interest is also offset against receivables rather than being classified as a liability.
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity.
Some balance sheet items have corresponding "contra" accounts, with negative balances, that offset them. Examples are accumulated depreciation against equipment, and allowance for bad debts (also known as allowance for doubtful accounts) against accounts receivable. [33]
So our inventory position and operations are well prepared for the holiday season. One quick final note on inventory. Third quarter ending inventory on our balance sheet was about 3% higher than a ...
The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the " lower of cost or market " rule. Prepaid expenses – these are expenses paid in cash and recorded as assets before they are used or consumed (common examples are insurance or office supplies).
When that same inventory is sold in later years for $75 per item, the company reports an income of $25 per item in the future period. This process takes an inventory loss and turns it into a 'profit'. Corporations will often wait until a bad year to employ this 'big bath' technique to 'clean up' the balance sheet.
Looking at the balance sheet, we ended the quarter with $296 million in cash. Our inventory balance was $1.52 billion, an increase of 2.2%, compared to last year. Total inventory units were flat.
Inventory may also cause significant tax expenses, depending on particular countries' laws regarding depreciation of inventory, as in Thor Power Tool Company v. Commissioner. Inventory appears as a current asset on an organization's balance sheet because the organization can, in principle, turn it into cash by selling it. Some organizations ...
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