A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
A liability account in a bank’s general ledger that indicates the amounts owed to bank customers for the balances in the customers’ individual checking, savings, and certificate of deposit accounts.
An income statement account for expense items that are too insignificant to have their own separate general ledger accounts.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
The recording of a company’s transactions into the accounts contained in the general ledger. It is usually associated with the accounting tasks prior to the preparation of the trial balance. To learn more about...
An internal accounting report that is prepared prior to recording the adjusting entries. Its purpose is to verify that the total amount of debit balances in the general ledger accounts is equal to the total amount of...
A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. (Restricted cash should be recorded in a different account.)
That part of the accounting system which contains the balance sheet and income statement accounts used for recording transactions.
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
A financial statement that shows all of the changes to the various stockholders’ equity accounts during the same period(s) as the income statement and statement of cash flows. It includes the amounts of...
To enter an amount on the right side of an account. Normal entries to revenue accounts are credits. Liabilities normally have credit balances. To learn more about debits and credits, see our Debits and Credits Outline.
for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The minimum number of accounts affected by every transaction is __________. 2. In a general journal entry,...
Is standard costing GAAP? Definition of Standard Costing Standard costing is a cost accounting system used by some manufacturers to assist in planning and controlling its manufacturing operations. When standard costing...
Is the sale of a plant asset recorded in the sales account? Definition of Sale of a Plant Asset The sale of a plant asset is often the disposal of a company’s equipment (or other asset) that had been used in the...
What are the accounting principles, assumptions, and concepts? Definition of Accounting Principles, Assumptions, and Concepts The basic underlying accounting principles, assumptions, and concepts include the following:...
Depreciation for the car’s accumulated depreciation Credit the asset account containing the car’s cost Credit the account Gain on Sale of Vehicles for the amount necessary to have the total of the debit amounts...
This is a national organization of certified public accountants. For more information go to www.aicpa.org.
Should I delay graduation for an accounting internship? If an accounting internship is optional, there are many factors to consider. The students who have been leaders in their college accounting organizations and have...
What is the traditional method used in cost accounting? Definition of Traditional Method in Cost Accounting The traditional method of cost accounting refers to the allocation of manufacturing overhead costs to the...
What are generally accepted accounting principles (GAAP)? Definition of Generally Accepted Accounting Principles Generally accepted accounting principles (commonly referred to as GAAP or US GAAP) are the common...
What is meant by the term relevance in accounting? Definition of Relevance In accounting, the term relevance could mean one of the following: An amount, disclosure, etc. that will make a difference to the decision maker...
Are commissions a cost of goods sold account or an expense? Definition of Commissions Commissions are compensation for obtaining sales. Hence, sales commissions are a selling expense and will be recorded in general...
What is the difference in salaries between a bookkeeper and an accountant? I estimate that a bookkeeper’s salary will be less than half of an accountant’s salary. For example, an accountant with a year or two of...
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
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...
These are the official rules that have been released by the Financial Accounting Standards Board. These are part of the generally accepted accounting principles. Before a standard is released, the public had been able to...
A nongovernment group of seven members assisted by a large research staff which is responsible for the setting of accounting standards, rules, and principles for financial reporting by U.S. entities. Go to www.fasb.org...
off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper. (Examples include interest on bank loans since the last loan payment, wages earned by...
What is accounting for price level changes? In 1979 the Financial Accounting Standards Board (FASB) issued its Statement of Financial Accounting Standards No. 33 entitled Financial Reporting and Changing Prices. (You...
An organization established by the U.S.’s Sarbanes-Oxley Act to oversee the auditors of corporations whose stock is publicly-traded. The PCAOB’s board members are appointed by the Securities and Exchange...
Why is Accumulated Depreciation an asset account? Definition of Accumulated Depreciation The account Accumulated Depreciation reports the total amount of depreciation expense that has been recorded from the time the...
What does the term arrears mean in accounting? Definition of Arrears In accounting, the term arrears will be used in the following situations: If a corporation does not declare and pay the dividend on its cumulative...
The general guidelines and principles, standards and detailed rules, plus industry practices that exist for financial reporting. Often referred to by its acronymn GAAP. To learn more, see Explanation of Accounting...
The independent organization based in the UK which develops the International Financial Reporting Standards (IFRS). The IASB has been working with the Financial Accounting Standards Board (FASB), which is based in the...
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
This series of output by the Financial Accounting Standards Board is part of the board’s conceptual framework project. The original goal in the 1970’s was to articulate the definitions, practices, and rules...
predict and estimate the future costs, but the past costs are otherwise irrelevant to the decision. That is why accountants will refer to a past cost as a sunk cost. Examples of Relevant Costs Assume that a company has...
How is the account Cash Short and Over used? Definition of Cash Short and Over Account The account Cash Short and Over is an income statement account (within a company’s general ledger) in which shortages or overages...
What is the accounting journal entry for depreciation? Definition of Journal Entry for Depreciation The journal entry for depreciation is: Debit to the income statement account Depreciation Expense Credit to the balance...
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