Depreciation Methods Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method Sum-of-the-years’-digits...
Depreciation Methods Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method Sum-of-the-years’-digits...
What is the entry for a loan to an employee? Definition of Loan to Employee A loan to an employee is money advanced by the company to assist the employee. If the employee is expected to repay the loan within one year of...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
To illustrate the calculation of net purchases, assume that a company had the following general ledger account balances at the end of its accounting year: Purchases had a debit balance of $250,000 Purchases Discount had...
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 +...
reconciliation the outstanding checks are a deduction from the bank balance (or balance per the bank statement). If an outstanding check from the previous month did not clear the bank account in the current month, the...
examples when the term carrying amount or carrying value is used: A company’s Accounts Receivable has a debit balance of $84,000. The company’s Allowance for Doubtful Accounts has a credit balance of $3,000. The...
that the stockholders are leaving in the corporation to be reinvested. The amount of retained earnings is reported in the stockholders’ equity section of the corporation’s balance sheet. Are Retained Earnings an...
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...
, the expense will be recorded as part of the entry. When the company pays the invoice, the balance in Accounts Payable is reduced and the balance in the company’s Cash account is reduced. The payment does not affect...
Where do worker compensation insurance costs get reported on the financial statements? Worker compensation insurance costs (also referred to as worker comp) should appear on the income statement and also on the balance...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
for uncollectible accounts (or) allowance for bad debts This is the title to the contra account associated with Accounts Receivable. It reports the anticipated amount of the receivables that will not be collected. Mark...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
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...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Which financial statement is considered to be a “snapshot” of a company’s financial...
receivable, net realizable value can also be expressed as the debit balance in the asset account Accounts Receivable minus the credit balance in the contra asset account Allowance for Uncollectible Accounts. In the...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
What would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to...
with recently deposited checks from customers, the money in a checking account is available on demand. (This is why banks refer to the amounts in their customers’ checking accounts as demand deposits.) The balances in...
: It is a note payable for the borrower who reports the note on its balance sheet as a liability It is a note receivable for the lender who reports the note on its balance sheet as an asset The interest promised in the...
will be recorded by the issuing corporation as a debit to Discount on Bonds Payable, a debit to Cash for $9,800,000, and a credit to Bonds Payable for $10,000,000. Over the life of the bonds, the initial debit balance...
. receives $24,000 on December 31, 2023 in exchange for promising to provide the client with services for the year January 1 through December 31, 2024. As of December 31, 2023 the entire $24,000 is unearned. Therefore,...
Purchase Allowances or to the account Purchase Returns and Allowances, and 2) a debit of $15 to Accounts Payable. The retailer will combine the debit balance in its Purchases account with the credit balance in Purchase...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
the expense reported on the income statement for the period when the expense was incurred and as a current liability on the end-of-the-year balance sheet. After the financial statements are distributed the adjusting...
What is a contra expense account? Definition of Contra Expense Account A contra expense account is a general ledger expense account that will intentionally have a credit balance (instead of the debit balance that is...
is also a contra account to owner’s equity, because the drawing account’s debit balance is contrary to the normal credit balance for an owner’s equity account. At the end of the accounting year, the drawing...
). However, sales have the effect of increasing a sole proprietorship’s credit balance in the owner’s equity section of the balance sheet, or a corporation’s stockholders’ equity section. (After the accounting...
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
of the corporation’s stockholders’ equity divided by the number of shares of common stock outstanding on that date. Both the amount of stockholders’ equity and the number of shares of common stock outstanding are...
account.) The Income Summary is very temporary since it has a zero balance throughout the year until the year-end closing entries are made. Next, the balance resulting from the closing entries will be moved to Retained...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
Returns. This allows the company’s management to see the magnitude of the returns that occurred. The account Purchases Returns is a general ledger account that will have a credit balance (or no balance). Its credit...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
financial statements will report: Income tax expense on its income statement for the revenues and expenses appearing on the accounting period’s income statement, and Income taxes payable (a current liability on the...
the loan) Credit Notes Payable for $100,000 (the principal amount that is due in two years) Since the principal balance of $100,000 will not be reduced until two years later, the note payable is reported on the balance...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
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