since it has a credit balance. Whenever depreciation expense is recorded (with a debit entry), Accumulated Depreciation is credited. The combination (or net) of the asset’s debit balance and the asset’s accumulated...
since it has a credit balance. Whenever depreciation expense is recorded (with a debit entry), Accumulated Depreciation is credited. The combination (or net) of the asset’s debit balance and the asset’s accumulated...
for $40,000 (the balance after the January 31 entry); debit Loss of Sale of Fixed Assets $7,000; and credit Machines for $50,000. The $7,000 loss recorded on January 31 is the result of removing the machine’s book...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
an adjusting entry that debits Bad Debts Expense and credits Allowance for Doubtful Accounts. If a company does not make a needed credit entry to the Allowance account, the company’s income statement will report too...
A corporation’s total stockholders’ equity (excluding preferred stock) divided by the number of shares of common stock outstanding.
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is bank balance and book balance? Definition of Bank Balance The term bank balance is commonly used when reconciling the bank statement. It is also known as the balance per bank or balance per bank statement....
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is the double-entry system? Definition of Double-Entry System The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts....
What is a recurring journal entry? Definition of Recurring Journal Entry A recurring journal entry is a journal entry that is recorded in every accounting period. Some recurring journal entries will involve the same...
What is a deferral adjusting entry? Definition of Deferral Adjusting Entry A deferral adjusting entry (one of three types of adjusting entries) pertains to a transaction that has already been recorded in the general...
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses...
See deferral-type adjusting entry.
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...
A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.
What is double-entry bookkeeping? Definition of Double-Entry Bookkeeping Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
What is a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
that has been in use for the past six years. In the decision, the original cost of the equipment and its carrying amount or book value does not have relevance (except in calculating a tax consequence). The reason is...
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
What does double entry mean? Definition of Double Entry In accounting, double entry means that every transaction will involve at least two accounts. Double entry also requires that one account be debited and the other...
What is the accounting journal entry for depreciation? Definition of Journal Entry for Depreciation The journal entry for depreciation is: Debit to the income statement account Depreciation Expense Credit to the balance...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
of depreciation taken on the plant assets since they were put into service. accumulated depreciation This contra asset account reports the amount of depreciation taken on the plant assets since they were put into...
about a gain, then you do report the gain. For example, if a company sells its old delivery truck for cash and the amount received is greater than the truck’s book value, there is no uncertainty and a gain is...
. There will be no depreciation expense recorded after the asset is fully depreciated. No entry is required until the asset is disposed of through retirement, sale, salvage, etc. To illustrate this, let’s assume that a...
The acronym for original equipment manufacturer.
A reduction in the original selling price.
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...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to...
What is the difference between book depreciation and tax depreciation? Definition of Book Depreciation Book depreciation is the amount recorded in the company’s general ledger accounts and reported on the company’s...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
This is a corporation’s own shares of stock that have been repurchased and have not been retired. Mark as wrong Mark as right book value per share of common stock This refers to a corporation’s stockholders’...
accumulated depreciation is subtracted from the asset’s cost to indicate the asset’s book value. The book value indicates the maximum amount of future depreciation remaining. Since depreciation is defined as the...
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