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 inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
. Example of a Revenue Accrual The accrual of revenues or a revenue accrual refers to the reporting of revenue and the related asset in the period in which they are earned, and which is prior to processing a sales...
by bookkeepers to indicate the right side of an account is __________. 9. Recording a debit and credit amount for every transaction is referred to as __________-entry bookkeeping or accounting. 10. The normal balance...
costs are reported on the balance sheet as __________. 15. An adjusting entry that involves the accrual of an expense will also involve this type of account. Select... Asset Liability Revenue 16. An adjusting entry that...
In the 1970’s the Financial Accounting Standards Board (FASB) articulated three objectives of financial reporting. In summary, financial information should (1) be useful to investors and lenders, (2) be helpful in...
A listing of the accounts available in the accounting system in which to record entries. The chart of accounts consists of balance sheet accounts (assets, liabilities, stockholders’ equity) and income statement...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
Is it possible to have a balance sheet for a single day? A balance sheet presents the amounts of a company’s assets, liabilities, and owner’s equity as of an instant or moment in time within a day. Usually it is 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...
What is the difference between vertical analysis and horizontal analysis? Definition of Vertical Analysis Vertical analysis expresses each amount on a financial statement as a percentage of another amount. The vertical...
the combination of the debit balance in Accounts Receivable and the credit balance in the related contra asset account Allowance for Doubtful Accounts. For JBCO the net amount of accounts receivable is $482,000...
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
flows. Select... asset liability 11. Generally, a decrease in the balances of __________ accounts will result in an increase of cash on the statement of cash flows. Select... asset liability 12. Under the indirect...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
One of the main financial statements. The balance sheet reports the assets, liabilities, and owner’s (stockholders’) equity at a specific point in time, such as December 31. The balance sheet is also referred...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
Also referred to as peripheral activities. A company’s activities outside of its main activities of buying/producing and selling. Examples include a retailer’s financing function involving interest revenue...
The contra owner’s equity account that reports the amount of withdrawals of business cash or other assets by the owner for personal use during the current accounting year. At the end of the accounting year, the...
The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...
What is capex? Definition of Capex Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following: Actual amounts that were spent during...
the company immediately, you can record the $100 phone bill by debiting Telephone Expense for $80 and debiting the asset account Receivable from Employees for $20. When you receive the $20 from the employee, you will...
containing the adjusted balances for the asset, liability and owner’s equity accounts. Under the Income Statement columns, the difference between the total of the debit column and the credit column is the amount of...
What is the entry when a company lends money to an employee? Definition of Employee Loan When a company lends money to one of its employees, the company is reducing its Cash and increasing another asset such as Other...
is the cost of goods on hand, it makes sense to relate it to the cost of goods sold. Assume that during the past year a company’s inventory had an average cost of $10,000. (This was the average of the amounts in the...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
What is a reclassification? Definition of Reclassification In accounting, the term reclassification is often used to describe moving an amount from one general ledger account to another. Examples of Reclassification...
on December 31 has a prepaid expense if on December 1, it paid $6,000 for insurance coverage from December 1 through May 31. Recording a Prepaid Expense A prepaid expense can be recorded initially as an expense or as a...
What is the effect on the income statement when the allowance for uncollectible accounts is not established? Definition of Allowance for Uncollectible Accounts The Allowance for Uncollectible Accounts or Allowance for...
asset Prepaid Insurance. During the month of January, the company should report $100 of insurance expense. At the end of January, the company’s balance sheet should report Prepaid Insurance of $500 (indicating that...
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...
suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has purchased goods on account. The supplier has also increased...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
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