Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit? Definition of Contributed Capital Contributed capital is one of the major components of a corporation’s stockholders’ equity....
Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit? Definition of Contributed Capital Contributed capital is one of the major components of a corporation’s stockholders’ equity....
What is the difference between a note payable and a bond payable? Definition of Note Payable and Bond Payable For accounting purposes, a note payable and a bond payable have the following similarities: Formal written...
What are production costs? Definition of Production Costs In managerial accounting and cost accounting, production costs are the costs that occur in the manufacturing facilities. Production costs are also referred to as...
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
What are inventoriable costs? Definition of Inventoriable Costs Inventoriable costs are: A retailer’s cost of the goods (products) that it purchased for resale, and any additional cost to get the goods in place and...
What is the entry for the down payment from a signed contract? Definition of Down Payment on a Contract A down payment on a signed contract means a company has received money in advance of doing the work specified in the...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
Why are the amounts on the financial statements rounded to thousands or millions? Definition of Rounding Amounts on Financial Statements Rounding the amounts on a company’s financial statements means dropping the less...
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...
What is the difference between liability and debt? Definition of Liability In accounting and bookkeeping, the term liability refers to a company’s obligation arising from a past transaction. Examples of Liabilities A...
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...
What is an incremental cost? Definition of Incremental Cost An incremental cost is the difference in total costs as the result of a change in some activity. Incremental costs are also referred to as the differential...
What are manufacturing costs? Definition of Manufacturing Costs Manufacturing costs are the costs of materials plus the costs to convert the materials into products. All manufacturing costs must be assigned to the units...
What is the difference between a ledger and a trial balance? Definition of a Ledger A ledger is often defined as a book of accounts. Today the ledger and its accounts are likely to be an electronic record or file....
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...
What is carriage inwards? Definition of Carriage Inwards Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered with terms FOB shipping point....
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
What are goods in transit? Definition of Goods in Transit Goods in transit refers to inventory items and other products that have been shipped by a seller, but have not yet reached the purchaser. When goods are in...
What is interest expense? Definition of Interest Expense Interest expense is the cost of borrowing money during a specified period of time. Interest expense is occurring daily, but the interest is likely to be paid...
What is bad debts? Definition of Bad Debts The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected. (Bad debts is also used for notes receivable that will not be...
How do you treat voided checks on the bank reconciliation? Definition of Voided Check on Bank Reconciliation If a check was voided in the current month but was written in the previous month and appeared on the previous...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
What is the entry for a loan to an employee? Definition of Loan to Employee A loan to an employee is money advanced by the company to assist the employee. If the employee is expected to repay the loan within one year of...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
Is there a difference between the accounts Purchases and Inventory? Purchases Account Under the Periodic Inventory System The general ledger account Purchases is used to record the purchases of inventory items under the...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
What is the FISH inventory method? FISH is the acronym for first-in, still-here. FISH is an attempt to bring humor to the fact that some items have been sitting in inventory for years. Unlike FIFO and LIFO, which are...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
What is direct labor? Definition of Direct Labor Direct labor refers to the employees and temporary staff who work directly on a manufacturer’s products. (People working in the production area, but not directly on the...
What is goodwill? Definition of Goodwill In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase...
What is a contra expense account? Definition of Contra Expense Account A contra expense account is a general ledger expense account that will intentionally have a credit balance (instead of the debit balance that is...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
Do I buy a new machine or use an old one? One technique for deciding whether to buy a new machine or to use an old machine is to look at the future cash flows if you buy a new machine and the future cash flows if you use...
What is the entry for an employee's personal phone calls included in the company's bill? Let’s assume that an employee has made personal phone calls of $20 which are included in the company’s phone bill of $100....
What is purchase discounts lost? Definition of Purchase Discounts Lost The account Purchase Discounts Lost is a general ledger account used by a company that records vendors’ invoices using the net method. A debit...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
What is float? Definition of Float In accounting and bookkeeping, float is the time between the writing of a check and the time that the check clears the bank account on which it is drawn. Examples of Float Payer...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
Featured Review
"I am a staff accountant at a small CPA firm in southern California. I previously worked as the accountant for a county probate department for a number of years, and also worked briefly for an oil & gas company. I finished my accounting degree in 2016, but it wasn't long into my career that I realized I didn't know many of the things I should have learned in college. I would often have to google things I should have already learned, and found that I was often directed to AccountingCoach, which answered nearly all my questions. That was when I decided to become a PRO user, and AccountingCoach became my primary tool for supplemental learning. There are tons of topics available and the concepts are taught in an easy-to-understand manner. I especially like the quizzes and the ease of use of the entire program. AccountingCoach has helped me learn many of the things I should have learned in college, and I believe it has directly influenced my professional growth." - Vincent M.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: