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...
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...
of a valuation account is that the amount in the main account is not changed, since the needed adjustment(s) are contained in a separate account. Examples of Valuation Accounts A common example of a valuation account is...
What is a debit balance? Definition of Debit Balance In accounting and bookkeeping, a debit balance is the ending amount found on the left side of a general ledger account or subsidiary ledger account. Examples of Debit...
. 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...
entry will affect a minimum of two accounts. For example, paying the rent usually means an entry to the account Cash and to the account Rent Expense. In addition, double entry requires that at least one account will be...
Does paying an account payable affect net income? Definition of Paying Accounts Payable Under the accrual basis of accounting, expenses are recorded when they have occurred, not when they are paid. Therefore, if an...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A listing of the account numbers and titles but without account balances is the __________...
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...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
to the next accounting year, a nominal account is also referred to as a temporary account. Examples of Nominal Accounts The nominal accounts are almost always the income statement accounts such as the accounts for...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
What is the provision for bad debts? Definition of Provision for Bad Debts The provision for bad debts could refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts,...
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.
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
of the accounts will receive a debit entry and at least one other account will receive a credit entry. Further, the amounts entered as debits must be equal to the amounts entered as credits. You should think of a debit...
What is a capital account? Definition of Capital Account In accounting and bookkeeping, a capital account is a general ledger account that is part of the balance sheet classification: Owner’s equity (in a sole...
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 Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
A listing of the general ledger accounts and their account balances at a point in time after the adjusting entries have been posted. The grand total of the accounts with debit balances should equal the grand total of the...
The debit or credit balance that would be expected in a specific account in the general ledger. For example, asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and...
is the __________ of accounts. 6. A listing of all of the account balances to show that the total of the debit balances is equal to the total of the credit balances is a __________ __________. 7. Entries to bring the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
an account receivable Selling a long-term investment View Coaching For the total amount of working capital to change, there must be a transaction that involves a working capital account and an account that is outside of...
that the net amount will also be reported. The net amount is often referred to as the carrying amount or perhaps the net realizable amount. Examples of Contra Accounts To illustrate, let’s use the contra asset account...
balance in a contra asset account will violate the cost principle.) Examples of Contra Asset Accounts The most common contra asset account is Accumulated Depreciation. Accumulated Depreciation is associated with...
is also referred to as the days’ sales in accounts receivable. Formula for Calculating the Average Collection Period One formula for calculating the average collection period is: 365 days in a year divided by the...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The end-of-year balances in the revenue accounts will become the following year’s beginning balances....
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account....
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
+ owner’s __________. 3. The __________-entry system requires that amounts be recorded in at least two accounts for each transaction. 4. When goods are sold on credit, the account that is debited is __________....
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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Why are assets and expenses increased with a debit? Definition of Debit In accounting the term debit indicates the left side of a general ledger account or the left side of a T-account. (The right side of an account or a...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
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