This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
and equipment (or) fixed assets This noncurrent section of the balance sheet reports the assets that are used in a business (buildings, equipment, etc.) and the related accumulated depreciation. property, plant and...
and all of the liabilities as of the end of the month. Another adjusting entry records the depreciation of assets used in the business. Every month the company must prepare an adjusting entry that debits Depreciation...
values. However, there are cases when the cost amounts are reduced to amounts that are less than the original cost amount. Example 1. A company purchased land in the year 1983 for $50,000. The company continues to own...
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
and $900,000 is credited to a contributed capital account such as Common Stock. Assume that two days later the corporation purchases real estate consisting of land and a warehouse/office building for $700,000....
account Cash. Select... debit credit 10. The balance you would expect in Accumulated Depreciation. Select... Debit Credit 11. Sales Discounts will likely have a __________ balance. Select... debit credit 12. The entry...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Expense and a credit to Accumulated Depreciation. Reporting bad debts expense pertaining to accounts receivable. This is done by either debiting Bad Debts Expense and crediting Allowance for Doubtful Accounts, or by...
been set aside to replace certain assets. Examples of Past Use of Reserve Two examples where the term reserve had been used include the following contra asset accounts: Reserve for Doubtful Accounts was renamed to be...
, Plant and Equipment. At that point, the depreciation of the addition will begin. (If a company is constructing an assembly line or a huge machine that will take time to build, the amounts would also be accumulated in...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
. Which of the following is a contra asset account? Select... Accumulated Depreciation Bond Issue Costs Discount on Bonds Payable J. Smith, Drawing View Coaching The only contra asset in the list is Accumulated...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
What is a controller's cushion? A controller’s cushion or controller’s reserve involves temporarily recording too much expense for an item that the controller calculates. For example, the controller might budget...
, Equipment, Vehicles, Goodwill, and many more. Two asset accounts, Allowance for Doubtful Accounts and Accumulated Depreciation, are known as contra asset accounts since these accounts are expected to have credit...
is sold for $5,000. If the truck had a cost of $40,000 and accumulated depreciation of $35,000 there will be no gain or loss reported on the income statement. The reason is the $5,000 received is equal to the $5,000 of...
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...
that has its cost of $50,000 in its account entitled Truck. The associated account Accumulated Depreciation has a credit balance of $43,000. The truck’s carry amount or book value is $7,000. A corporation has Bonds...
for cash and when accounts receivable are collected Cash will decrease when cash is paid for expenses, inventory, equipment, liabilities, etc. Accounts payable will increase for expenses that were not paid with cash...
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....
and Accumulated Depreciation) Expense accounts (other than a contra expense account) Contra revenue accounts (such as Sales Discounts, Sales Returns and Allowances) Owner’s Drawing account Treasury Stock account Join...
account. It comes about when a company has received cash in advance of earning it. As a result the company has the cash, but also has the obligation/liability to perform the service, deliver the product, or return...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
and the depreciation expense begins. This expense will reduce the company’s profits (net income, earnings). There may also be some additional revenues and costs, and perhaps cost savings, that will also affect the...
Is the depreciation of delivery trucks a period cost or is it manufacturing overhead? The depreciation on the trucks used to deliver products to customers is a period cost. The depreciation on delivery trucks will be...
is placed into service, the account Construction Work-in-Progress will be credited for its balance (the accumulated costs) and will be recorded with a debit in the appropriate property, plant and equipment account....
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...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
. That is, there is no outlay of cash. The accounting entry is a debit to Depreciation Expense and a credit to Accumulated Depreciation. Hence, no cash is used at the time of the depreciation entry. Cash was most likely...
Improving Profits Improving Profits Improving profits or reducing operating losses is likely to require some decisions and some action. Both the decisions and the actions involve the future and may involve: expanding a...
of a noncash expense is depreciation. To illustrate, let’s assume that a company purchased equipment two years ago for a cash payment of $200,000. The company determined that the equipment had a useful life of 10...
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.
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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