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 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 are gains? Definition of Gains In financial accounting, gains often pertain to some of a company’s transactions which occur outside of the company’s main business activities. Transactions which are outside of a...
What are byproducts? Byproducts, or by-products, are products with relatively little value that emerge from a common process along with the main products. The main products have significant value and are referred to as...
See Allowance for Doubtful Accounts.
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses...
A section of a publicly traded corporation’s annual report to the SEC (Form 10-K). This section contains extensive information from management about the corporation’s financial condition and its operations.
See entity as a whole.
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
Also referred to as operating expenses. These expenses are reported in the period in which they were incurred, not the period in which they were paid.
Also known as time-and-one-half. A term used in conjunction with overtime pay when an employee gets a 50% higher pay rate for hours in excess of 40 hours per week. The “half” is also known as the overtime...
A sorting of a company’s accounts receivables by the age of the receivables.
These pronouncements were issued by the Committee on Accounting Procedures of the American Institute of Certified Public Accountants during the years 1953 to 1959. They were and are part of the generally accepted...
What is accounting? Definition of Accounting Accounting is the recording of financial transactions along with storing, sorting, retrieving, summarizing, and presenting the results in various reports and analyses....
What are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
The expensing of an intangible asset from the balance sheet to the income statement.
See accrual basis of accounting.
A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise. This of course will reduce the...
A sorting of a company’s accounts payable by due date.
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
What items are added to the balance per bank on the bank reconciliation? Bank Reconciliation Adjustments to Bank Balance The items that are added to the balance per bank when doing a bank reconciliation include: Deposits...
What is a dividend and why is it needed? A dividend paid by a corporation is a distribution of profits to the owners of the corporation. The owners of a corporation are known as stockholders or shareholders. (In a sole...
Is there a relationship between direct materials variances and direct labor variances? Definition of Direct Materials Variances Direct materials variances (pertaining to standard costing) commonly consist of two...
What is recorded in the Wages and Salaries Expense account? Definition of Wages and Salaries Expense The account Wages and Salaries Expense (or separate accounts such as Wages Expense or Salaries Expense) are used to...
Why aren't retained earnings distributed as dividends to the stockholders? Definition of Retained Earnings Retained earnings is one component of the stockholders’ equity section of a corporation’s balance sheet. Some...
What is the difference between gains and proceeds in terms of long-term assets? Definition of Long-term Assets Long-term assets, which are also referred to as noncurrent assets, are assets that generally are not expected...
In adjusting entries, how do I know which T-accounts to use? We illustrate the common adjusting entries with the use of T-accounts in the Explanation of the Topic Adjusting Entries available for your reading at no...
How do you record an asset that was partially financed? Example of Recording an Asset that was Partially Financed Assume that your company purchased a car for $10,000 by paying cash of $4,000 and signing a promissory...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
What is the difference between the accounts rent receivable and rent revenue? Definition of Rent Receivable Rent Receivable is the title of the balance sheet asset account which indicates the amount of rent that has been...
Are salaries and wages part of expenses on the income statement? Definition of Salaries and Wages Salaries and wages are forms of compensation paid to employees of a company. Salaries and Wages as Expenses on Income...
What is a balance sheet and why is it prepared? Definition of Balance Sheet The balance sheet is prepared in order to report an organization’s financial position at the end of an accounting period, such as midnight on...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
How many days after a month ends should the bank reconciliation be done? Definition Bank Reconciliation The bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking...
Why is there a large difference between share value and stockholders' equity? There can be many reasons why the market value of a corporation’s stock is much greater than the amount of stockholders’ equity reported...
Do I buy a new machine or use an old one? One technique for deciding whether to buy a new machine or to use an old machine is to look at the future cash flows if you buy a new machine and the future cash flows if you use...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
Why is it necessary to allocate a lump sum payment to individual items? It is necessary to allocate a lump sum payment to individual items in order to record a fair portion of the lump sum in each of the proper general...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
What accounts for the difference in inventory values between periodic LIFO and perpetual LIFO? Difference Between Periodic LIFO and Perpetual LIFO The difference between periodic LIFO and perpetual LIFO involves the time...
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