A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
Why do people start their businesses as sole proprietorships? I believe that people start their businesses as a sole proprietorship because a sole proprietorship can be formed easily, quickly, and with little cost....
Future Value of a Single Amount Future Value of a Single Amount The future value of a single amount is also known as the future value of 1. The amount is a single, one-time deposit made at time period 0, which is also...
What is the difference between Present Value (PV) and Net Present Value (NPV)? Definition of Present Value (PV) Present value or PV is the result of discounting one or more future amounts to the present. The greater the...
What is the double-entry system? Definition of Double-Entry System The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts....
What is premium on bonds payable? Definition of Premium on Bonds Payable Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. This is...
Depreciation Depreciation In accounting, depreciation is the spreading (allocation) of an asset’s cost over the many accounting periods in which it is used. The assets that are depreciated include buildings, equipment,...
What does the direct labor efficiency variance tell us? This variance tells us how efficient the direct labor was in making the actual output that was produced by the direct labor. The direct labor efficiency variance...
What should be the entry when goods are purchased at a discount? Definition of Goods Purchased at a Discount There are two common types of discounts for companies buying goods to resell: Trade discount Early payment...
Where is the discount on the purchase of office furniture recorded? Definition of Discount on Purchase of Office Furniture The discount on the purchase of office furniture that will be used by a company (as opposed to...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
What are credit terms? Definition of Credit Terms Credit terms indicate when payment is due for a company’s sales invoice (which the customer will refer to as a purchase invoice). The credit terms also indicate whether...
The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...
Depreciation(Quick Test #3 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the answer...
What is the difference between entries in a general journal versus a general ledger? Definition of General Journal The general journal is described as the book of original entry. Today the general journal is used to...
What is discount on bonds payable? Definition of Discount on Bonds Payable Discount on bonds payable (or bond discount) occurs when a corporation issues bonds and receives less than the bonds’ face or maturity amount....
What is a flexible budget? Definition of a Flexible Budget A flexible budget is a budget that adjusts or flexes with changes in volume or activity. The flexible budget is more sophisticated and useful than a static...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
What is an unsecured creditor? Definition of Unsecured Creditor An unsecured creditor is often a vendor or supplier that: Shipped goods to a customer as part of a sale on credit Has not been paid Does not have a lien on...
How does revenue affect the balance sheet? Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts receivable) and an increase in the...
What is the accounting equation? Definition of Accounting Equation The accounting equation of a sole proprietorship is assets = liabilities + owner’s equity. For a corporation, the accounting equation is assets =...
What is a sunk cost? Definition of Sunk Cost A sunk cost is a cost that was incurred in the past and cannot be undone. Since most transactions cannot be undone, most amounts spent in the past are sunk. A past or sunk...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for calculating...
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
Bookkeeping (Test for Prospective Employees #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers....
Evaluating Business Investments For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If...
Financial Accounting Financial Accounting Financial accounting is a type or branch of accounting that begins with the recording, sorting and storing of a business’s transactions in accounts contained in its general...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
A balance sheet liability account that reports amounts received in advance of being earned. For example, if a company receives $10,000 today to perform services in the next accounting period, the $10,000 is unearned in...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
Debits and Credits(Quick Test #3) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
What are sales discounts? Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. Sales discounts...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
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