What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
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...
What is an accountant? Definition of Accountant Accountants are employed by businesses and other organizations to report their financial results according to generally accepted accounting principles (GAAP) and income tax...
What are accounting ratios? Definition of Accounting Ratios Accounting ratios, which are also known as financial ratios, are one part of financial statement analysis. Accounting ratios will often relate one financial...
What are fixed assets? Definition of Fixed Assets Fixed assets are a company’s tangible, noncurrent assets that are used in its business operations. The word fixed indicates that these assets will not be used up,...
What is a liability account? Definition of Liability Account A liability account is a general ledger account in which a company records the following which resulted from business transactions: Amounts owed to suppliers...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
What is a permanent account? Definition of Permanent Account In accounting, a permanent account refers to a general ledger account that is not closed at the end of an accounting year. The balance in a permanent account...
What is an accounting period? Definition of Accounting Period An accounting period is the period of time covered by a company’s financial statements. Common accounting periods for external financial statements include...
Why are loan costs amortized? Definition of Loan Costs Loan costs may include legal and accounting fees, registration fees, appraisal fees, processing fees, etc. that were necessary costs in order to obtain a loan. If...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
What is an accounting clerk? Definition of Accounting Clerk An accounting clerk is typically a person with an aptitude for numbers who can process a large volume of details accurately and quickly with a minimal amount of...
What is a toxic asset? I would define a toxic asset as an investment whose value has dropped significantly and there is no market in which to sell the asset. To illustrate, let’s assume that at the peak of the real...
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
Why are sales a credit? Definition of Sales In accounting, sales are revenues earned when a company transfers ownership of its goods to its customers. Under the accrual basis or method of accounting, the sale occurs when...
What are adjusting entries? Definition of Adjusting Entries Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company’s financial statements comply with the...
What are net assets? Definition of Net Assets Net assets is defined as total assets minus total liabilities. Examples of Net Assets In a sole proprietorship the amount of net assets is reported as owner’s equity. In a...
Is depreciation a temporary account? Definition of Depreciation Accounts There are two types of general ledger accounts in which depreciation is recorded: Depreciation Expense which is a temporary account since it is an...
Are estimates allowed in bookkeeping? While bookkeeping involves mostly precise amounts from sales and purchase invoices, cash receipts and checks written, etc. there are situations when estimates need to be entered....
What if an employee's actual vacation payment is greater than the amount that has been accrued? Let’s assume that a company’s accounting year ends on December 31 and the company has only one employee who worked the...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
Will I be able to pass the CPA Exam after studying the accounting material on AccountingCoach.com? AccountingCoach.com contains introductory accounting material. While you need to master the principles and concepts...
Seventeen years ago I earned an accounting degree. How should I proceed to become a CPA? To pass the CPA Exam you will need to review all that you had learned plus get current on accounting and auditing standards that...
Why is an increase in inventory shown as a negative amount in the statement of cash flows? Meaning of a Negative Amount on Statement of Cash Flows A negative amount on the statement of cash flows (SCF) indicates that the...
Bookkeeping Video Training Part 8 Adjusting entries: accrued expenses, reversing the accrual of expenses after the accounting period is over Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
What is an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
Bookkeeping Video Training Part 3 Accounts for expenses are debited, the income statement and balance sheet are connected, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and...
Bookkeeping Video Training Part 10 Adjusting entries: recap of accruals, deferrals, one balance sheet account and one income statement account will be affected Must-Watch Video Learn How to Advance Your Accounting and...
What is the difference between a deferred expense and a prepaid expense? Definition of Deferred Expense and Prepaid Expense Deferred expense and prepaid expense both refer to a payment that was made, but due to the...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
What are reversing entries and why are they used? Definition of Reversing Entries Reversing entries are made on the first day of an accounting period to remove accrual adjusting entries that were made at the end of the...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
Why would a balance sheet list current liabilities as negative amounts? Reasons for Negative Current Liabilities on a Balance Sheet Some older accounting software used minus signs or parentheses to indicate credit...
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...
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