as accounts payable or accrued compensation. Examples include the interest expense that the company has incurred (but has not yet paid) and repairs that took place but the vendor’s invoice has not been processed....
as accounts payable or accrued compensation. Examples include the interest expense that the company has incurred (but has not yet paid) and repairs that took place but the vendor’s invoice has not been processed....
of insurance expense each and every year.) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh...
. Liquidation value is subjective and the amount can vary significantly depending on the assumptions made. The matching principle requires that the cost of plant assets be allocated to depreciation expense. This means...
for the sole proprietorship business does not include an expense for the owner working in the business. This means that the reported net income is the total return for the owner’s work and investment. Join PRO to...
reduced to $0 Receiving and posting a customer’s payment that was greater than the customer’s balance in Accounts Receivable Continuing to reduce the balance in Prepaid Expenses and charging expense after the...
per unit is $4 Fixed SG&A expenses per month is $12,000 Variable SG&A expenses per unit is $2 Fixed interest expense per month is $1,000 Using the above information the contribution margin per unit is $14 (the...
/declare the dividend. Hence, the board of directors may decide that a dividend will not be declared. Definition of Dividends It is important to note that the dividends declared and paid by a corporation are not an...
statements will report depreciation expense of $7,500 in each of the 12 years remaining on the lease. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
by the corporation will be deductible on the corporation’s income tax return. If a corporation’s combined federal and state income tax rate is 35%, then $100,000 of interest expense will save the corporation $35,000...
% ($120,000/$400,000). Definition of Operating Income A retailer’s operating income is its sales minus the cost of goods sold and all selling and administrative expenses (fixed and variable). Operating income is...
with Debit Balances The following general ledger account classifications normally have debit balances: Asset accounts Expense accounts Loss accounts (Loss on Sale of Plant Asset, Loss from Lawsuit, etc.) Sole...
in the bank’s liability account is reduced by a debit. In the company’s general ledger, the bank debit memo will reduce the company’s checking account (which is an asset) and will require the company to credit its...
account and credits the owner’s drawing account. Please note that the owner’s drawing account is not an expense and as a result it does not get closed to the Income Summary account nor will the amount appear on the...
of the sale. In order to know the asset’s book value at the time of the sale, the depreciation expense for the asset must be recorded right up to the date that the asset is sold. If the cash received is greater than...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
prepare a balance sheet as of the end of each day, you will need to make daily adjusting entries in order for the balance sheet to be meaningful. For example, each day more electricity is used and therefore each day...
(general office salaries, rent, utilities, etc.), and interest expense will be reported on the income statement when they are directly related to sales or when they are used up. For example, the insurance premiums that...
in the product cost will be part of the cost of goods sold that is reported on the income statement. The remaining $5,000 of rent for nonmanufacturing functions is expensed each month without being allocated to the...
$232,000. The result was a favorable SG&A expense budget variance of $8,000. Manufacturing overhead costs were budgeted to be $400,000 but were actually $393,000. The result was a favorable manufacturing overhead...
of expense, etc. Popular accounting software will include some examples of charts of accounts. Our Explanation of Chart of Accounts includes two hypothetical examples. Join PRO to Track Progress Mark the Question as...
Journal Entries (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. 1. The accrual of interest expense is recorded in the _________ journal. GENERAL NERLEAG...
What is an intangible asset? Definition of Intangible Asset An intangible asset is an asset that you cannot touch, since it lacks physical substance. Accountants record intangible assets at their cost when they are...
balances in the discount, premium, or issue costs accounts must be amortized to interest expense over the life of the bonds. Example of Recording a Bond Issue Assume that a corporation issues $100 million of bonds...
to the expense Purchase Discounts Lost. In our example, if the company pays the invoice in 30 days, it is not entitled to the early payment discount and will therefore have to credit Cash for $1,000. The debit amounts...
and Maintenance Expense. Until the invoice from Joe’s Plumbing Service is paid, Joe’s invoice serves as a supporting document for the balance in the corporation’s Accounts Payable. (The invoice is also a...
are: Economic Entity Assumption Going Concern Assumption Time Period Assumption Monetary Unit Assumption Cost Principle (or Measurement Principle) Matching Principle (or Expense Recognition Principle) Revenue...
an impact on the company’s cost of goods sold. The cost of goods sold will likely be the largest expense reported on the income statement. Example of Inventory Cost and Cost of Goods Sold To show the connection...
ledger accounts will need to be adjusted with a credit to the Cash account and a debit to an account such as Bank Fees Expense. Therefore, as part of the bank statement reconciliation you need to show the bank service...
prices based on their costs. In the long run, the products’ selling prices must be large enough to cover all of a company’s manufacturing costs (including the variable and fixed indirect manufacturing costs) plus...
four months earlier and the check has not yet cleared the company’s bank account. Example of Writing Off an Old Outstanding Check On January 22, a company issued a check for $124 for a business expense. As of June 30,...
account for emergency computer maintenance services and had not recorded the credit to its Cash account, it is also omitting the debit to the account Computer Maintenance Expense. The bank reconciliation could prevent...
and a $2,000 debit entry will be recorded in its Rent Expense account. If a company collects $500 from a customer who had previously purchased goods on credit, the company will make a debit entry of $500 in its Cash...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
. The reason is that the interest is not owed as of that date. Each month, one month’s interest on the note or loan should be recorded with a debit to Interest Expense and a credit to Cash or Interest Payable (if the...
and net amounts for accounts receivable and for property, plant and equipment Contra-expense accounts such as Purchases Discounts, Purchases Returns and Allowances, and Expenses Reimbursed by Employees. The credit...
many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold. The total capex amount that was spent in a recent accounting period is reported in the statement...
What is the advantage of issuing bonds instead of stock? Definition of Bonds Bonds payable are a form of long-term debt, which include a formal agreement to pay interest semiannually and the principal amount at maturity....
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