How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
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...
, between a company’s balance sheet date of December 31, 2023 and the time that the financial statements are distributed on January 31, 2024, it is possible a significant event occurs or information becomes known that...
Are direct costs fixed and indirect costs variable? Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine, geographic market, etc. (which are...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
basis, such as $50,000 per year. Many employees working in a company’s general office will be paid a salary. Often the salaries are paid semi-monthly. That is, one pay date will be the 15th day of the month for...
What is an accounting period? Definition of Accounting Period An accounting period is the period of time covered by a company’s financial statements. Common accounting periods for external financial statements include...
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
What is bookkeeping? Definition of Bookkeeping Bookkeeping includes the recording, storing and retrieving of financial transactions for a business, nonprofit organization, individual, etc. Examples of Bookkeeping Tasks...
disclosure required by Statement 33 was the reporting of the effects of general inflation as indicated by the change in the consumer price index. In other words, a large company had to disclose in the notes to its...
How do you record a dividend payment to stockholders? Definition of Dividend Payment to Stockholders A dividend payment to stockholders is usually a cash payment which reduces the corporation’s asset cash and the...
an incorrect amount. Example of Overstated If a company reports that its prepaid insurance is $8,000, but the true or correct amount of prepaid insurance is only $7,000, the accountant will say that the reported amount...
What is the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
How can I learn bookkeeping? You can learn bookkeeping at no cost on our website AccountingCoach.com. We recently expanded our Explanation of Bookkeeping, and we have many other topics that are relevant including debits...
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
debit balances, while the liability and owner’s equity accounts are expected to have credit balances. Therefore, when a company earns revenues, it will debit an asset account (such as Accounts Receivable) and will...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
What is a liability account? Definition of Liability Account A liability account is a general ledger account in which a company records the following which resulted from business transactions: Amounts owed to suppliers...
internally by a company over time. Since the brand name was not purchased from another entity, there is no past transaction and purchase cost to be recorded. I assume that an entity’s payment made to another...
months. Between the interest payment dates, the company will have: Accrued interest income that is to be reported on the income statement Accrued interest receivable that is to be reported on the balance sheet Accrued...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
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...
asset turnover and fixed asset turnover are indicators of a company’s effectiveness in utilizing its assets. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
be recorded in the company’s accounts or reported as liability on the balance sheet. Instead, the contingent liability will be disclosed in the notes to the financial statements. Not Reporting or Disclosing a...
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
machine hours needed to meet the company’s production schedules. Normal capacity is the annual machine hours that have occurred over a span of several years. Example of Practical Capacity Assume that a manufacturer...
usually had an option to print the liability account balances on the balance sheet without the negative signs. If only one liability account has a negative sign, it is likely that the liability account has a debit...
What is an account? Definition of Account In accounting, an account is a record in the general ledger that is used to sort and store transactions. For example, companies will have a Cash account in which to record every...
of Conversion Costs An example of direct labor are the employees working on the assembly line of a manufacturer. Examples of manufacturing overhead include the utilities, indirect labor, repairs and maintenance,...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
In what order are liabilities listed in the chart of accounts? Order for Listing Liabilities It is logical for a company’s liabilities to be organized in the chart of accounts in the same way as they are presented on...
In a bank reconciliation, what happens to the outstanding checks of the previous month? Definition of Outstanding Checks Outstanding checks are checks written by a company, but the checks have not cleared the bank...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
during their useful lives. Plant assets (other than land) are depreciated over their useful lives and each year’s depreciation is credited to a contra asset account Accumulated Depreciation. Plant assets and the...
. As soon as possible, the amount(s) in the suspense account should be moved to the proper account(s). Example of Using a Suspense Account An accountant was instructed to record a significant number of journal entries...
suppliers. If you purchase an asset and the sales tax is required, the sales tax should be recorded as part of the cost of the goods or services received. For example, if you were required to pay sales tax on the new...
pays for its purchases 90 days after it receives the goods. The corporation does not have sufficient money to purchase the raw materials, pay for the labor, and then wait 90 days to collect the receivable. The...
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