What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
What is common stock? Definition of Common Stock Common stock refers to the shares of ownership interest in a U.S. corporation. The owners of the common stock are referred to as common stockholders, common shareholders,...
How do you account for payroll withholdings for health insurance? Definition of Payroll Withholdings for Health Insurance Payroll withholdings for health insurance are the amounts deducted from employees’ pay for their...
What is the distinction between debtor and creditor? Definition of Debtor A debtor is a person or enterprise that owes money to another party. The party to whom the money is owed might be a supplier, bank, or other...
Why are some plastic cards called debit cards? I assume the name debit card relates to the reduction in the cardholder’s checking account balance at the time that the card is used. The checking account balances of a...
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...
What is the difference between financial accounting and management accounting? Definition of Financial Accounting Financial accounting has its focus on the financial statements which are distributed to stockholders,...
on December 31 was already in bankruptcy condition, the corporation must adjust its December 31 balance sheet by reducing its net receivables by $200,000 and reporting bad debts expense of $200,000 on its income...
Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
What is the meaning of debtor? Definition of Debtor A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed. Example of Debtor If...
What is the difference between income and profit? Definition of Income The term income is used differently by many people. For some, income means the money coming in, such as What is your family income? What is your...
What is the difference between an implicit cost and an explicit cost? Definition of Implicit Cost An implicit cost is present but it is not initially shown or reported as a separate cost. Definition of Explicit Cost An...
Closing Entries(Quick Test) Download PDF After you have answered all 10 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of...
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,...
, there are occasions when the general ledger expense accounts will be credited. Examples of Expenses being Credited Below are some examples of when general ledger expense accounts are credited: When recording closing...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Why and how do you adjust the inventory account in the periodic method? Definition of Inventory Account in Periodic Method Under the periodic method or periodic system, the account Inventory is dormant throughout the...
What are the journal entries for a stock split? Definition of a Stock Split A stock split usually increases the number of shares of a corporation’s common stock with the intention of reducing the market price of each...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
What journal entries are prepared in a bank reconciliation? Definition of Journal Entries in a Bank Reconciliation Journal entries are required in a bank reconciliation when there are adjustments to the balance per...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real account....
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
What is a recurring journal entry? Definition of Recurring Journal Entry A recurring journal entry is a journal entry that is recorded in every accounting period. Some recurring journal entries will involve the same...
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
of another account. Accountants often use T-accounts to visualize the debit and credit effects on the accounts’ balances. It may take some time to learn which general ledger accounts will be debited and credited, but...
The entry made in a journal. It will contain the date, the account name and amount to be debited, and the account name and amount to be credited. Each journal entry must have the dollars of debits equal to the dollars of...
The 500 year-old accounting system where every transaction is recorded into at least two accounts. To learn more, see Explanation of Debits and Credits.
A journal entry with more than the minimum of one debit and one credit. Example: a debit to Cash of $500 and a credit to Sales of $475 and a credit to Sales Tax Payable of $25.
An entry without debit or credit amounts. For example, assume that a corporation has 100,000 shares of $0.50 par value common stock before a 2-for-1 stock split. At the time of the split a memo entry would be entered in...
Also known as a journal.
The journal entry recorded in the general journal (as opposed to the sales journal, cash journal, etc.).
An accounting entry with only one account being debited and only one account being credited.
A journal entry to correct an erroneous amount previously entered in the general ledger.
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...
In accounting, what is the meaning of cr.? In accounting, cr. is the abbreviation for credit. In accounting and in bookkeeping, credit or cr. indicates an entry on the right side of a general ledger account. Credit...
What are accrued expenses and when are they recorded? Accrued Expenses Accrued expenses are expenses that have occurred but are not yet recorded in the company’s general ledger. This means these expenses will not...
Is the reversal of a previous year's accrued expense permanent? Definition of Reversal of Accrued Expense An accrued expense typically requires an accrual adjusting entry recorded at the end of an accounting year...
When do you adjust the amount of prepaid expenses? Definition of Adjusting Prepaid Expenses The balance in the current asset account Prepaid Expenses should be adjusted prior to a company issuing its financial...
of the detailed amounts in Accounts Receivable The result of recording the credit part of the entries to Bad Debts Expense that were based on a percentage of credit sales Example of Bad Debts Expense and Allowance for...
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