What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
When does a negative cash balance appear on the balance sheet? Definition of Negative Cash Balance A negative cash balance results when the cash account in a company’s general ledger has a credit balance. The credit or...
What is an outstanding deposit? Definition of Outstanding Deposit An outstanding deposit refers to a company’s receipts (cash, checks from customers, etc.) which have been recorded in the company’s general ledger...
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
What are interim financial statements? Definition of Interim Financial Statements Interim financial statements report amounts for time intervals that are shorter than a company’s annual financial statements. The...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
What are net assets? Definition of Net Assets Net assets is defined as total assets minus total liabilities. Examples of Net Assets In a sole proprietorship the amount of net assets is reported as owner’s equity. In a...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
What is IFRS? IFRS is the acronym for International Financial Reporting Standards. IFRS is used throughout the world except in the United States where U.S. GAAP (generally accepted accounting principles) is followed....
What is the meaning of debit? Definition of Debit The term debit is similar to the term used in Italy more than 500 years ago when the double entry accounting system was documented. What you need to know today is that...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
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...
How do you calculate accrued vacation pay? Definition of Accrued Vacation Pay Accrued vacation pay is the amount of vacation pay that a company’s employees have earned, but the company has not yet paid. Example of...
What is retained earnings? Definition of Retained Earnings Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of dividends that were declared. Retained...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
What is the difference between Rent Receivable and Rent Payable? Definition of Rent Receivable Rent Receivable is an asset account in the general ledger of a landlord which reports the amount of rent that has been earned...
What is recorded in the Wages and Salaries Expense account? Definition of Wages and Salaries Expense The account Wages and Salaries Expense (or separate accounts such as Wages Expense or Salaries Expense) are used to...
Why is a negative cash balance reported as a liability? The following will illustrate why a negative cash balance is reported as a liability instead of being reported as a negative asset amount. Company X writes checks...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
What is budgeting? Definition of Budgeting Budgeting is the process of preparing detailed projections of future amounts. Companies often engage in two types of budgeting: Operational budgeting, and Capital budgeting...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
What is the purpose of the cash flow statement? Definition of Cash Flow Statement The cash flow statement or statement of cash flows or SCF identifies a company’s major cash inflows and outflows that occurred the same...
What is lead time in purchasing? In purchasing, lead time is the estimated time between ordering goods and receiving the goods. For instance, if 100 units of Product X are ordered on April 11 and are expected to be...
What are dividends? In accounting, dividends often refers to the cash dividends that a corporation pays to its stockholders (or shareholders). Dividends are often paid quarterly, but could be paid at other times. For a...
Is AccountingCoach.com based on GAAP or IFRS? The materials presented on AccountingCoach.com are based on U.S. GAAP. Since the accounting materials on AccountingCoach.com are generally introductory concepts, the...
What is the difference between fixed assets and noncurrent assets? Fixed Assets are Part of Noncurrent Assets Fixed assets are one of several categories of noncurrent assets. Fixed assets are usually reported on the...
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 is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
What does the term arrears mean in accounting? Definition of Arrears In accounting, the term arrears will be used in the following situations: If a corporation does not declare and pay the dividend on its cumulative...
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