What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. An entry on the right side of a T-account. Select... Debit Credit 2. This will increase the...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
type of account? Select... Current asset Current liability Income statement 25. If a U.S corporation’s shares of stock are traded on a stock exchange, which report will contain management’s discussion of the...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
is associated with Accounts Receivable and the Allowance for Doubtful Accounts. 3. Depreciation Expense is associated with the contra-asset account __________ Depreciation. 4. Insurance Expense is associated with the...
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...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
Are repairs to office equipment an expense? Repairing and maintaining office equipment is an immediate expense. This is true even if the repair cost is a very large amount. If a large expenditure is made to improve...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
What is the difference between the accounts rent receivable and rent revenue? Definition of Rent Receivable Rent Receivable is the title of the balance sheet asset account which indicates the amount of rent that has been...
are also referred to as permanent accounts. Examples of Real Accounts The real accounts are the balance sheet accounts which include the following: Asset accounts (cash, accounts receivable, buildings, etc.) Liability...
A dollar adjusted for inflation. If an asset such as land was purchased for $10,000 many years ago when the consumer price index (CPI) was 100 and today the CPI is 400, today’s constant-dollar amount would be...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
This journal has been referred to as the “book of original entry”. It requires that both the account being debited and the account being credited be listed along with the respective amounts. general journal This...
that it no longer uses in its business. The amount received by the company is more than the amount the asset is carried at in the accounting records. The company will report a(n) __________. Expense Wrong. Expenses are...
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...
A balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
An amount remaining after another amount is subtracted. In the accounting equation, owner’s equity is the residual of assets minus liabilities.
Using debt in order to control more assets. Also known as financial leverage.
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
A net debit balance for the total amount of owner’s equity. It is the result of the reported amount of liabilities exceeding the reported amount of assets.
Also referred to as shareholders’ equity. At a corporation it is the residual or difference of assets minus liabilities. To learn more about stockholders’ equity, see our Stockholders’ Equity Outline.
A balance sheet with classifications (groupings or categories) such as current assets, property plant and equipment, current liabilities, long term liabilities, etc. To learn more, see Explanation of Balance Sheet.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
The withdrawal of business cash or other assets by the owner for the personal use of the owner. Withdrawals of cash by the owner are recorded with a debit to the owner’s drawing account and a credit to the cash...
A company’s loss before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
Also known as a permanent account. Includes the balance sheet accounts (assets, liabilities, and owner’s or stockholders’ equity accounts) but excludes the owner’s drawing account, which is a temporary...
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
A lender or supplier who is owed money but does not have a lien on any of the assets of the company that owes the money. If the company that owes the money is liquidated, the unsecured lender receives money only after...
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
The balance sheet classification that is reported immediately after current assets and before property, plant, and equipment.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
A dividend paid in assets other than cash.
Featured Review
"I am currently working for a Pharmacy Benefits Management company (PMB). I discovered AccountingCoach when I was in college going through the accounting program. Sometimes in school, the concepts weren't always clear to me, or I just needed a concise refresher on certain accounting topics. AccountingCoach fulfilled both of these needs for me. I became a PRO user because I found value in the additional resources I received. It really helped me to solidify my understanding of the accounting process. I like the materials on AccountingCoach because of the clarity and conciseness of the information. I find myself wanting to brush up on things from time to time, and because of the format of the AccountingCoach platform, I'm able to quickly find what I need. I have benefited from the materials both academically and professionally. In school, I did well in my courses, and I know that using AccountingCoach contributed to my success. Professionally, I have felt confident in communicating with my coworkers regarding accounting concepts, which has in turn helped me to progress in the company. Sometimes when I’m working, I reference the templates provided on AccountingCoach to guide my work. I will be using this site for years to come!" - M.G.
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: