prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
or as an asset, the amounts must be adjusted so that the financial statements report the expense (reported as the cost of goods sold on the income statement for the year) at $6,900 and the asset inventory (reported on...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
The system where the general ledger account Inventory is not updated during the year. Rather, the merchandise purchased is recorded in temporary purchases accounts. At the time a balance sheet is presented, the inventory...
Cost Let’s assume that a company purchased land in 1997 for $100,000. It continues to own the land and has not made any improvements. Today the land should be reported on the company’s balance sheet at its...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
Is it okay to have negative amounts in the equity section of the balance sheet? Definition of Equity Section of the Balance Sheet The equity section of the balance sheet is known as: Owner’s equity if it is a sole...
Why would a balance sheet list current liabilities as negative amounts? Reasons for Negative Current Liabilities on a Balance Sheet Some older accounting software used minus signs or parentheses to indicate credit...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
What items are added to the balance per bank on the bank reconciliation? Bank Reconciliation Adjustments to Bank Balance The items that are added to the balance per bank when doing a bank reconciliation include: Deposits...
Will every transaction affect an income statement account and a balance sheet account? Definition of Income Statement and Balance Sheet Accounts A company’s general ledger accounts are arranged into two categories...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
How should a mortgage loan payable be reported on a classified balance sheet? Definition of a Mortgage Loan Payable The account Mortgage Loan Payable contains the principal amount owed on a mortgage loan. (Any interest...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
Why will some asset accounts have a credit balance? Definition of Asset Account Balances In accounting, asset accounts normally have debit balances. That is, the general ledger accounts for assets typically have their...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
Why does commitment and contingencies appear on the balance sheet without an amount? Definition of Commitments and Contingencies Commitments and contingencies is a balance sheet line with no amount reported. The line...
Where is the premium or discount on bonds payable presented on the balance sheet? Definition of Premium or Discount on Bonds Payable The premium or discount on bonds payable is the difference between the amount received...
Where can I find an illustration of a common size balance sheet? You will find an illustration of a common size balance sheet under AccountingCoach.com’s Explanation of Financial Ratios. The common size balance sheet...
How do you calculate the average balance in accounts receivable? The average will be more representative if you include additional balances in the computation. For example, if you compute the average balance for the year...
Why does a company's profit appear as a credit on its balance sheet? The accounting equation and the double entry system provide an explanation why a company’s profit appears as a credit on its balance sheet....
If a company earns a profit, which balance sheet items change? Definition of Profit Profit is the result of revenues minus expenses. How Profits Change the Balance Sheet Since all business transactions affect at least...
Does the income statement explain the change in the equity section of a balance sheet? The income statement could explain the change in the equity section of a balance sheet. However, there are likely to be some other...
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
account. The income statement account Bad Debts Expense was affected earlier when the Allowance balance was established or adjusted. For financial reporting purposes the allowance method is preferred since it means the...
amounts of revenues, expenses, gains, losses, assets, liabilities, and stockholders’ equity. Common Characteristic of Adjusting Entries Every adjusting entry will involve: At least one balance sheet account, and At...
by reading our Adjusting Entries (Explanation). 1. What type of entry will increase the normal balance of the general ledger account Service Revenues? Debit Wrong. Credit Right! Since revenues cause stockholders'...
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