Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
purchase, the corporation’s general ledger accounts will have a debit balance of $200,000 in the current asset account Cash, a debit balance of $100,000 in the noncurrent asset account Land, a debit balance of...
income statement as the cost of goods sold. The goods that are unsold at the end of the accounting period must be reported on the retailer’s balance sheet as inventory. Accounting for the Goods Purchased There are two...
that the objective of the accounting process is to have accurate financial statements. In this case we want an income statement which reports an accurate amount of cost of goods sold, and the resulting gross profit...
was returned unpaid. Perhaps, the customer’s checking account balance was insufficient, perhaps a stop payment order prevented the check from being paid, or perhaps there was another reason. When the unpaid check...
Accounting Equation Basic Accounting Equation In accounting (and bookkeeping) the basic accounting equation is: Thanks to double-entry accounting (or double-entry bookkeeping) the basic accounting equation will/...
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.
Can you help me to understand credit memo and debit memo in the bank reconciliation? Definition of Bank Credit Memo A bank credit memo is an item on a company’s bank account statement that increases a company’s...
with an imprest balance of $100. The petty cash custodian has $17.00 on hand and is preparing a check request to replenish the fund. The petty cash receipts show disbursements of $81.00 consisting of $30.00 for supplies...
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 Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
and Over provides a way to monitor employees’ cash handling proficiency. Generally, the amounts in the account Cash Short and Over are so small that the account balance will be included with other insignificant...
, conservatism means recording the transaction or situation in a manner that results in less profit, less asset amount, and/or a greater liability amount. Example of Conservatism in Accounting One example of...
. The amount of the insurance premiums that remain prepaid at the end of each accounting period are reported in the current asset account, Prepaid Insurance. The balance in this account will be combined with the balances...
Why is there a large difference between share value and stockholders' equity? There can be many reasons why the market value of a corporation’s stock is much greater than the amount of stockholders’ equity...
or unfavorable for the company’s cash balance Example Where Inventory Increased An increase in a company’s inventory indicates that the company has purchased more goods than it has sold. Since the purchase of...
general ledger account. As a result, the nominal accounts are also referred to as temporary accounts. The closing process also means that each nominal account will start the next accounting year with a zero balance....
10 or more years after the date they are issued. Example of Bonds Payable Maturing within One Year of the Balance Sheet Date Bonds that will be maturing within one year of the balance sheet date will be reported as a...
equation and the balance sheet, both of which are presented in this format: Assets = Liabilities + Stockholders’ (or Owner’s) Equity. Some of the company’s most valuable assets may not have been acquired in a...
What is an outstanding check? Definition of Outstanding Check An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on...
Is a loan payment an expense? Definition of Loan Payment Generally a loan payment consists of: An interest payment, which is an expense A principal payment, which reduces the loan’s principal balance If the interest...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
What is not sufficient funds? Definition of Not Sufficient Funds Not sufficient funds or NSF or insufficient funds is a term to describe a check that has been returned by the bank because the balance in the checking...
Why are revenues credited? Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of...
to a balance sheet account until a later accounting period when it will be moved to the income statement. Deferral is also used to describe the type of adjusting entries used to defer amounts at the end of an accounting...
in the general and subsidiary ledgers Preparing an unadjusted trial balance and perhaps preparing a worksheet Determining and recording adjusting entries Preparing an adjusted trial balance Preparing the financial...
that a company’s: Income statement reports the revenues that have been earned during the accounting period Balance sheet reports the receivables that it has a right to receive as of the end of the accounting period...
a company was during a time interval (period of time), such as a year, quarter, month, 52 weeks, etc. Costs that occurred but are not yet expensed on the income statement are typically referred to as deferred costs,...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
of the sinking fund balance growing to approximately $20 million by the time the bonds come due in 20 years. The corporation will report the bond sinking fund balance in the investments section of its balance sheet. The...
at the time of the payment should be debited to Notes Payable. The balance in the liability account Notes Payable should agree with the principal balance owed to the lender. The balance in the liability account Interest...
examples to show the usefulness of Herb’s tip. When a company receives the bank statement for its checking account, the bank statement already shows the deduction for the bank’s service charge. Therefore, the bank...
How many days after a month ends should the bank reconciliation be done? Definition Bank Reconciliation The bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking...
on the company’s balance sheet. The cash received from the bank loan is referred to as the principal amount. The principal amount received from the bank is not part of a company’s revenues and therefore will not be...
on specified future dates Reported as liabilities Interest is accrued as a current liability Principal that is due within one year of the balance sheet date is reported as a current liability (unless there is a bond...
, there is no contra asset account such as Allowance for Doubtful Accounts. Therefore the entire balance in Accounts Receivable will be reported as a current asset on the company’s balance sheet. As a result, the...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
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