What is a suspense account? Definition of Suspense Account A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger...
What is a suspense account? Definition of Suspense Account A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger...
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 cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
What is the double-entry system? Definition of Double-Entry System The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts....
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
Is there a difference between the accounts Purchases and Inventory? Purchases Account Under the Periodic Inventory System The general ledger account Purchases is used to record the purchases of inventory items under the...
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...
What is a memorandum entry? Definition of Memorandum Entry A memorandum entry is a short message entered into the general journal and also entered into a general ledger account. It is not a complete journal entry because...
What are consolidated statements of operations? Consolidated statements of operations is the heading appearing on the financial statement also referred to as the income statement. In a small survey of 14 U.S....
What is cash from operating activities? Definition of Cash from Operating Activities Cash from operating activities usually refers to the first section of the statement of cash flows. Cash from operating activities...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
What is an uncleared cheque? Definition of Uncleared Cheque An uncleared cheque is a cheque (check) that has been written and recorded in the payer’s records, but has not yet been paid by the bank on which it is drawn....
What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
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 can a company with a net loss show a positive cash flow? Definition of Net Loss A net loss occurs when a company’s revenues and gains are less than its operating expenses, other expenses and losses. The net loss or...
Where is the discount on the purchase of office furniture recorded? Definition of Discount on Purchase of Office Furniture The discount on the purchase of office furniture that will be used by a company (as opposed to...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
What is the effective interest rate for a bond? Definition of Effective Interest Rate of a Bond The effective interest rate of a bond is usually the market interest rate and the bond’s yield-to-maturity (as opposed to...
Why is an amount in the cash flows from investing activities shown in parenthesis? An amount shown in parenthesis within the investing activities section of the cash flow statement indicates that cash was used to...
What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
What does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
What are sundry expenses? Definition of Sundry Expenses In accounting and bookkeeping, sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
What is a trial balance? Definition of a Trial Balance A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization’s general ledger accounts. (Often the accounts with zero...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
What is a LIFO Reserve? Definition of LIFO Reserve The LIFO reserve is a contra inventory account that indicates the difference between the following: Inventory cost reported on the balance sheet under the LIFO cost flow...
What is a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
How do you calculate staff turnover? To calculate staff turnover, I would use the W-2 wage statements for the most recent year. My first step would be to sort the W-2’s into meaningful groups such as full-time...
What are prepaid expenses? Definition of Prepaid Expenses Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
How do you record an owner's money that is used to start a company? Recording Money to Start a Sole Proprietorship If Amy Ott begins a sole proprietorship by putting money into her business, the sole proprietorship will...
Why is Rent Expense a debit and Service Revenues a credit? Why Rent Expense is a Debit Rent expense (and any other expense) will reduce a company’s owner’s equity (or stockholders’ equity). Owner’s equity which...
Is advertising an asset or an expense? Definition of Advertising Expense Advertising is the amount a company incurs to promote its products, brands, and image via television, radio, magazines, Internet, etc. Since the...
Are transportation-in costs part of the cost of goods sold? Definition of Transportation-in Costs Transportation-in costs, which are also known as freight-in costs, are part of the cost of goods purchased. The reason is...
What does crossfoot mean? Definition of Crossfoot or Crossfooting Accountants and auditors use the word foot to mean adding one or more columns of numbers. When there are several columns of numbers along with a...
What is the accounting cycle? Definition of Accounting Cycle The accounting cycle is often described as a process that includes the following steps: Identifying, collecting and analyzing documents and transactions...
What does debit memo mean on a bank statement? Definition of Bank Debit Memo A debit memo on a company’s bank statement refers to a deduction by the bank from the company’s bank account. In other words, a bank debit...
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