to pay at a later date, the company records the sale with a debit to Accounts Receivable and a credit to the revenue account Sales. The Sales account is a temporary account used to keep a tally of the sales made during...
to pay at a later date, the company records the sale with a debit to Accounts Receivable and a credit to the revenue account Sales. The Sales account is a temporary account used to keep a tally of the sales made during...
an accounting year it reports the owner’s capital account and the owner’s drawing account. owner's equity This section of a sole proprietor’s balance sheet reports the difference in the amount of a...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Savings accounts and certificates of deposits at a bank.
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
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...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
goes out” or “personal accounts” are inadequate and not helpful to people such as yourself. If you desire to gain a true and deeper understanding of debits, credits, and accounts you are likely to find our free...
What is included in cash and cash equivalents? Examples of Cash In accounting, a company’s cash includes the following: currency and coins checks received from customers but not yet deposited checking accounts petty...
revenues are considered earned when the goods have been shipped or delivered to the customers and the merchandiser has a right to a collectible accounts receivable. (Under accrual accounting it is not necessary to have...
working capital and the current ratio. Examples of Current Assets Examples of current assets and the typical order of liquidity include: Cash and cash equivalents (which includes currency, checking accounts, petty cash,...
bookkeepers may be involved in the following activities: Processing vendors’ invoices Billing and following up on accounts receivable Payroll processing Managing cash Reconciling account balances Perhaps preparing and...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
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...
What is a comparative balance sheet? Definition of Comparative Balance Sheet A comparative balance sheet typically has two columns of amounts that appear to the right of the account titles or other descriptions such as...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
Liability A loss contingency which is possible but not probable will not be recorded in the accounts as a liability and a loss. Rather, it will be disclosed in the notes to the financial statements. A loss contingency...
, a contingent asset and gain will not be recorded in a general ledger account or reported on the financial statements until they are certain. [This is different from contingent liabilities and contingent losses, which...
during the month, but the transactions had not been recorded in the accounts as of the end of the month To record the expenses, losses, and their related liabilities which were incurred during the month, but the...
What is the carrying amount? Definition of Carrying Amount The term carrying amount is also known as book value or carrying value. The term carrying amount is often used when there is a valuation account associated with...
, payments to vendors, payroll, monitoring receivables, preparing journal entries, and more. I view an accounting clerk as a person employed by a larger company and having a more specialized role. For example, a large...
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...
Advertising Expense. The accounts for revenues are almost always credited. When a bakery sells its products, it credits Sales. When a bank earns interest on its loans, it credits Loan Interest Revenues. When a company...
in the company’s general ledger accounts. Examples of Journal Entries for Bank Reconciliation Examples of items requiring a journal entry as the result of the bank reconciliation include: Bank service charges which...
or the owner’s capital account, an expense will also cause one or more of the following changes to the balance sheet: A decrease in Cash, Prepaid Expenses, Supplies on Hand, Inventory An increase in the credit balance...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Statement Wrong. Statement Of Cash Flows Wrong. Statement Of Comprehensive Income Wrong. Statement Of Stockholders’ Equity Wrong. 8. Is it true or false that a grocery store’s sale of its old delivery van to one of...
... Accounts payable Accounts receivable Cash Inventory 6. Which of the following will result in an increase in the quick ratio? Select... Collection of an account receivable Sales of products on credit 7. Which of the...
Financial Statements Video Training Part 6 Balance sheet: current liabilities (notes payable, accounts payable, accrued expenses, customer deposits) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Merchandise that was returned to the seller by a customer. This account is a contra sales account. When merchandise sold on credit is returned, this account is debited and Accounts Receivable is credited.
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.)
An income statement account for expense items that are too insignificant to have their own separate general ledger accounts.
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
That part of the accounting system which contains the balance sheet and income statement accounts used for recording transactions.
A revenue account in a bank’s general ledger that indicates the amounts earned by the bank by servicing its customers’ accounts at the bank.
Receivables other than Accounts Receivable. Examples include amounts due from employees and income tax refunds receivable.
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.
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