What is principles of accounting? Three meanings come to mind when you ask about principles of accounting… Principles of accounting was often the title of the introductory course in accounting. It was also common for...
What is principles of accounting? Three meanings come to mind when you ask about principles of accounting… Principles of accounting was often the title of the introductory course in accounting. It was also common for...
What are sales taxes? In the United States, most of its 50 States assess a sales tax, which is a tax on sales to the end user. For example, in the state of Wisconsin a retailer must collect a 5% sales tax and perhaps...
What are capital expenditures? Definition of Capital Expenditures Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital...
What is an imprest system of petty cash? Definition of Petty Cash Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. The amount of petty cash (also...
What are payroll withholding taxes? Definition of Payroll Withholding Taxes In the U.S. payroll withholding taxes are the taxes that an employer is required to deduct from its employees’ gross wages, salaries, bonuses,...
What is an uncleared cheque? Definition of Uncleared Cheque An uncleared cheque is a cheque (check) that has been written and recorded in the payer’s records, but has not yet been paid by the bank on which it is drawn....
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for calculating...
Does a dividend reduce profit? Definition of Dividend A dividend declared by a corporation is a distribution to its stockholders of the profits the corporation had earned. Since the dividends are not an expense, the...
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
What are some examples of investing activities? Definition of Investing Activities Investing activities often refers to the cash flows from investing activities, which is one of the three main sections of the statement...
What is the difference in salaries between a bookkeeper and an accountant? I estimate that a bookkeeper’s salary will be less than half of an accountant’s salary. For example, an accountant with a year or two of...
Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
What is a cash cow? A cash cow is often a profitable product or service that dominates a market and generates far more cash than is needed to maintain its market position. Companies may use the money from the cash cow to...
What is a deposit in transit? Definition of Deposit in Transit A company’s deposit in transit is the currency and customers’ checks that have been received and are rightfully reported as cash on the date received,...
What is the purpose of the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts or Allowance for Uncollectible Accounts is a general ledger contra account...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
Is a security deposit a current asset? Definition of Security Deposit A security deposit is often an amount paid by a tenant to a landlord to hold until the tenant moves. The amount of the security deposit is refundable...
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
What is the journal entry to record a one-year subscription for a magazine? Ways to Record One-Year Subscriptions Let’s assume that the cost of the one-year subscription for a monthly trade publication is $120. Let’s...
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...
I don't understand the conservatism principle. Why do losses get recorded but not gains? Conservatism has to do with uncertainty. When uncertainty exists between two alternatives that appear to be reasonable, the...
What is a vendor? Definition of Vendor In the context of accounts payable, a vendor is a person or business that supplies goods or services to the company. Another term for vendor is supplier. The term vendor can also be...
How do I learn more about the CPA Exam? You can learn more about the Uniform CPA Exam at our free Accounting Career Center. Within our Accounting Career Center are direct links to the state boards of accountancy, CPA...
Why would a business change its chart of accounts? There can be several reasons for a business to change its chart of accounts. One reason for changing the chart of accounts is to better match how the business is...
What are debits and credits? Definition of Debits and Credits Debits and credits are terms used in accounting and bookkeeping systems for the past five centuries. They are part of the double entry system which results in...
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...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
Why does a company debit Purchases instead of Inventory? Definition of Purchases and Inventory When a company uses the periodic inventory system the amount of the company’s inventory is determined by a physical count...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
What is a credit? Definition of a Credit In bookkeeping and accounting, a credit likely refers to the amount entered on the right side of a general ledger account or to the right side of a T-account. A credit could also...
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
What does it mean to rotate stock? Definition of Rotating Inventory Stock To rotate stock means to arrange the oldest units in inventory so they are sold before the newer units. The goal is to avoid losses due to getting...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
What items are added to the balance per bank on the bank reconciliation? Bank Reconciliation Adjustments to Bank Balance The items that are added to the balance per bank when doing a bank reconciliation include: Deposits...
Are utility bills an expense or a liability? Definition of Utility Bills Utility bills are invoices received by a company for the natural gas, electricity, water, and sewer charges that the company used during a previous...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
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