Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
to the next accounting year, a nominal account is also referred to as a temporary account. Examples of Nominal Accounts The nominal accounts are almost always the income statement accounts such as the accounts for...
of a T-account. Debit Right! Credit Wrong. 4. A listing of the balances in the accounts in order to determine whether the total amount of debits is equal to the total amount of credits is a __________ trial balance. 5....
bank account. You can learn more by visiting our topic Bank Reconciliation. Accounts Receivable Accounts receivable arise when a company sells goods on credit. For instance, some companies provide its customers with...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
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.
What is a capital account? Definition of Capital Account In accounting and bookkeeping, a capital account is a general ledger account that is part of the balance sheet classification: Owner’s equity (in a sole...
of the accounts will receive a debit entry and at least one other account will receive a credit entry. Further, the amounts entered as debits must be equal to the amounts entered as credits. You should think of a debit...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
A listing of the general ledger accounts and their account balances at a point in time after the adjusting entries have been posted. The grand total of the accounts with debit balances should equal the grand total of the...
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
The debit or credit balance that would be expected in a specific account in the general ledger. For example, asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and...
an account receivable Selling a long-term investment View Coaching For the total amount of working capital to change, there must be a transaction that involves a working capital account and an account that is outside of...
. A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. (Restricted cash should be recorded in a different account.)...
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,...
is also referred to as the days’ sales in accounts receivable. Formula for Calculating the Average Collection Period One formula for calculating the average collection period is: 365 days in a year divided by the...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The end-of-year balances in the revenue accounts will become the following year’s beginning balances....
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...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Why are assets and expenses increased with a debit? Definition of Debit In accounting the term debit indicates the left side of a general ledger account or the left side of a T-account. (The right side of an account or a...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
The general ledger account Cash that reports currency, coins, undeposited checks, and the checking accounts of a company. (Could also be a reference to a customer required to pay cash for purchases.)
increases. Decrease Wrong. No Effect Wrong. Liabilities Increase Right! The company's liability account Accounts Payable increases. Decrease Wrong. No Effect Wrong. Owner's (or Stockholders') Equity...
See temporary accounts.
See Explanation of Accounting Equation.
will usually cause an asset account to increase? Debit Right! Credit Wrong. 19. What will usually cause the liability account Accounts Payable to increase? Debit Wrong. Credit Right! 20. Entries to expenses such as Rent...
The bank account on which checks are written or drawn. A bank refers to checking accounts as demand deposits.
ratio, here are some additional accounting/financial ratios: Quick ratio Debt to equity ratio Accounts receivable turnover ratio Days’ sales in inventory Interest coverage ratio Gross margin ratio Return on...
The stockholders’ equity account which reports the par value of the preferred shares of stock that have been issued. Amounts received that are greater than the par value are recorded in Paid-in Capital in Excess of...
A revenue, expense, gain, or loss account. To learn more, see Explanation of Income Statement.
The stockholders’ equity account that reports the par or stated value of the issued shares of common stock. If the common stock does not have a par or stated value, this account will report the amount received when...
A liability account with a debit balance. Discount on Bonds Payable is a contra account associated with the liability account Bonds Payable.
What is the accounting cycle? Definition of Accounting Cycle The accounting cycle is often described as a process that includes the following steps: Identifying, collecting and analyzing documents and transactions...
in some aspect of maintaining a company’s general ledger which is the source of the amounts reported in the company’s financial statements. Hence, the accountants are likely to oversee the following: Billing and...
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...
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