Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
will be a debit of $1,000 to the income statement account Depreciation Expense and a credit of $1,000 to the balance sheet contra asset account Accumulated Depreciation. Depreciation on the Income Statement The...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that the...
not been recorded in the company’s general ledger accounts. Examples of Journal Entries in a Bank Reconciliation Common adjustments to the balance per books include: Bank fees or service charges for maintaining the...
money to the business, the entry will be to debit Cash and credit a liability account such as Notes Payable. (If Amy invests an asset other than cash, the business will record the cash equivalent or fair market value of...
What is the annual wage limit? Definition of Annual Wage Limit Annual wage limit is a payroll accounting term that is associated with the Social Security payroll tax. (The annual wage limit is also known as the annual...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
adjusting entry that debits Vacation Expense for $200 (10 hours X $20 per hour) and credits Vacation Liability for $200. As a result, the balance in the balance sheet account Vacation Liability at December 31 is $2,400...
How can a company have a profit but not have cash? Definition of Profit Under the accrual basis of accounting, profit is the amount of revenues earned minus the amount of expenses incurred. Note that revenues are not...
ledger account Accounts Payable. Example of Recording a Liability without the Vendor’s Invoice At any time, the retailer’s accounts payable clerk/department will have many transactions waiting to be recorded in...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
inventories and cost of goods sold contain $2 per pound for the materials and its materials purchase price variance account contains an unfavorable variance of $600,000 [1,000,000 X ($2.60 – $2.00)]. To comply with...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
by the utility after six months of timely payments. The new business will record the deposit with a $500 debit to the current asset account Utilities Deposits and will credit the asset account Cash for $500. The...
received only $1,940,000 from investors. The resulting difference of $60,000 must be recorded in the contra-liability account Discount on Bonds Payable. The corporation must also record the bond issue costs (legal,...
What is apportionment? An apportionment is an allocation based on some proportions. I associate the term apportionment with a corporation’s taxable income that was earned in many states within the U.S. In that...
What is preferred stock? Definition of Preferred Stock Preferred stock is a type of capital stock issued by some corporations in addition to its common stock. Preferred stock is also known as preference stock. The word...
What is a blank endorsement? In the case of a check payable to John Smith (the payee), a blank endorsement would be the signature of John Smith on the back side of the check without any other words above or below his...
What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
What is the days' sales in inventory ratio? Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to sell its inventory during a recent...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
How do you determine whether a person is an independent contractor or an employee? To assist you in determining whether someone is an independent contractor or an employee, you should refer to the Internal Revenue...
What is the difference between public sector and private sector? Definition of Public Sector Public sector refers to: government-owned organizations, and government-provided services (Note: public sector entity is...
What is the procedure for preparing a trial balance? Definition of a Trial Balance A trial balance consists of the following information: The title of each general ledger account that has a balance To the right of the...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
How can a business increase its cash flow from operations? A business can increase its cash flow from operations (or operating activities) by looking closely at each of its current assets and current liabilities. For...
the following: Debit Cash Credit the account(s) that was debited when the check was originally recorded This entry increases the general ledger account Cash (that contains the company’s checking account). It also...
What is a recurring journal entry? Definition of Recurring Journal Entry A recurring journal entry is a journal entry that is recorded in every accounting period. Some recurring journal entries will involve the same...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
How do I record money received for an insurance claim on inventory loss? Definition of Money from Insurance Claim for Inventory Loss Let’s assume that a company has insurance on its inventory and its inventory is...
’ equity usually have credit balances. When a company provides services for cash, its asset Cash is increased by a debit and its owner’s equity is increased by a credit. The credit is initially recorded in a revenue...
What is annualizing? Definition of Annualizing Annualizing means taking a partial year amount and converting it to a full year amount. We will use several examples to illustrate how this works. Examples of Annualizing A...
How do you calculate the payroll accrual? Definition of Payroll Accrual The payroll accrual is the amounts a company owes for work done by employees, but the amounts have not yet been recorded in the company’s general...
’ equity section of the balance sheet, the cash that was generated from those retained earnings is not likely be in the company’s checking account. Instead, the corporation likely used the cash to acquire additional...
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