A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
What type of account is the Dividends account? Definition of Dividends Account When a corporation declares a cash dividend, the amount declared will reduce the amount of the corporation’s retained earnings. Instead of...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
and Exchange Commission (Form 10-K), especially the section entitled Management’s Discussion and Analysis Quarterly earnings reports, press releases and other communications The notes to a company’s financial...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
to the retailers. Obviously its turnover ratios will be less impressive than the ratios of the first company. A company’s management is another variable that explains differences in the profit margin and turnover...
. These costs are partially fixed and partially variable. Understanding how costs behave is important for management’s planning and controlling of its organization’s costs, and for cost-volume-profit analyses...
include a highly-respected trade name, a valuable patent, a very effective management team and company culture. Example of Assets Examples of assets that are likely to be listed on a company’s balance sheet include:...
What is a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
the company’s management to understand the financial impact of its past and future decisions. The distinction between accountant and bookkeeper keeps changing as accounting software and other software evolves. For...
, the outside accountant converts the client’s data into financial statements without providing any assurances or auditing services. A compilation report should accompany the compiled financial statements to indicate...
. The aging is also useful for estimating the amount needed in the related account Allowance for Doubtful Accounts. Example of an Aging Report The aging report lists each customer’s name and its unpaid sales invoices...
depreciation cannot exceed the asset’s cost. The cost principle prohibits a company from recording an asset that was not acquired in a transaction. Hence, a company cannot report its highly successful management team...
fees, dues, fundraising events, grants, and investment income. Expenses are presented as program activities or supporting activities (management and general, and fundraising). Join PRO to Track Progress Mark the...
are the depreciation of the building, salaries of the company’s management, etc. For a company’s financial statements to have relevance they must be issued within several weeks after each accounting period ends. To...
Returns. This allows the company’s management to see the magnitude of the returns that occurred. The account Purchases Returns is a general ledger account that will have a credit balance (or no balance). Its credit...
-insurance is too risky for an individual and for a small business with one store. The reason is that a huge loss to its one building may be too much to recover from. Every company should review its specific situation...
What is decentralization? Definition of Decentralization Decentralization refers to a company’s top management delegating authority to subunits or segments of the company such as a company consisting of a consumer...
and documentation of the warehousing activities required by zero-based budgeting may lead to a better use of space, better inventory management, etc. If those efficiencies are achievable, perhaps the budget for the...
amount if it is paid within 10 days instead of the required 30 days) the amount of the discount is recorded in the contra revenue account Sales Discounts. Again, the company’s management will see the original amount...
also means that some very valuable aspects of the company are not listed as assets. For example, a company’s outstanding reputation, its effective management team, and its amazing brand recognition are not reported as...
variances and will be recorded in separate variance accounts. Any balance in a variance account indicates that the company is deviating from the amounts in its profit plan. While standard costs can be a useful...
built up within a company as a result of delivering amazing customer service, unique management, teamwork, etc. However, this goodwill is unrelated to a business combination and cannot be recorded or reported on the...
and general management, are expenses of the accounting period and are not applied or assigned to products.) Actual overhead are the manufacturing costs other than direct materials and direct labor. Since the overhead...
What are external financial statements? Definition of External Financial Statements External financial statements are those distributed outside of the company’s management. Some of the recipients of the external...
computing the staff turnover, be sure to discuss the staff turnover rate with the company’s management. Training new employees only to have an above average person leave after the training period is very expensive....
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
A term that describes the steps when processing transactions (analyzing, journalizing, posting, preparing trial balances, adjusting, preparing financial statements) in a manual accounting system. Today many of the steps...
A liability account with a debit balance. Discount on Bonds Payable is a contra account associated with the liability account Bonds Payable.
What is an account payable? Definition of an Account Payable An account payable is an amount owed to a supplier or vendor for goods or services that were provided in advance of payment. However, some people use the term...
The contra owner’s equity account that reports the amount of withdrawals of business cash or other assets by the owner for personal use during the current accounting year. At the end of the accounting year, the...
the account balances prior to issuing financial statements in order to comply with the accrual method of accounting as well as other accounting principles and standards. Issuing financial statements to a variety of...
Part of a company’s administration that is responsible for preparing the financial statements, maintaining the general ledger, paying bills, billing customers, payroll, cost accounting, financial analysis, and...
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
What is a T-account? Definition of T-Account A T-account is a visual aid used to depict a general ledger account. The account title is written above the horizontal part of the “T”. On the left-side of the vertical...
A sorting of a company’s accounts payable by due date.
Also referred to as real accounts. Accounts that do not close at the end of the accounting year. The permanent accounts are all of the balance sheet accounts (asset accounts, liability accounts, owner’s equity...
An owner’s or stockholders’ equity account with a debit balance instead of the normal credit balance. Examples include the owner’s drawing account, a dividend account, and the treasury stock account.
obligations and include deferred revenues. Mark as wrong Mark as right owner's equity This is the difference between the amount of a proprietorship’s assets and liabilities. It consists of the owner’s capital...
See accrual basis of accounting.
Featured Review
"I became a PRO user back when I was an accounting student pursuing my bachelor's degree. Accounting is like a whole different language, so I found it difficult to learn in the beginning. As someone who did not have prior accounting knowledge in high school, it would take me a while before I would understand the topics. Then I found AccountingCoach, and it helped me tremendously in really grasping the concepts at my own pace. I also utilized the exams as practice for my actual exams. I found that the most effective way to test one's knowledge is to try it on their own, and the materials on AccountingCoach allowed me to do just that. I graduated Summa Cum Laude and am now an accountant at a local public accounting firm. I am really thankful for the resources provided by AccountingCoach when I was still a student, and I am looking forward to maximizing the benefits with PRO Plus now as a professional!" - Katrina T.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: