Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
What is the meaning of debtor? Definition of Debtor A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed. Example of Debtor If...
How does inflation affect the cost of goods sold? Inflation and the Cost of Goods Sold Generally speaking, a company selling goods during periods of inflation will see an increase in its cost of goods sold. When and by...
How do you record the interest that is unpaid on a note payable? Definition of Interest Unpaid on Note Payable Interest that has occurred, but has not been paid as of a balance sheet date, is referred to as accrued...
What is the distinction between debtor and creditor? Definition of Debtor A debtor is a person or enterprise that owes money to another party. The party to whom the money is owed might be a supplier, bank, or other...
What is the gross margin ratio? Definition of Gross Margin Ratio The gross margin ratio is a percentage resulting from dividing the amount of a company’s gross profit by the amount of its net sales. (The gross margin...
What is meant by events after the balance sheet date? Definition of Events After Balance Sheet Date Events after the balance sheet date are significant financial events that occur after the date of the balance sheet but...
What are the reasons for high inventory days? Definition of Inventory Days I assume that inventory days is referring to the days’ sales in inventory. If so, then inventory days is also related to the inventory turnover...
Why are some plastic cards called debit cards? I assume the name debit card relates to the reduction in the cardholder’s checking account balance at the time that the card is used. The checking account balances of a...
What is a petty cash voucher? Definition of Petty Cash Voucher A petty cash voucher is usually a small form that is used to document a disbursement (payment) from a petty cash fund. Petty cash vouchers are also referred...
What is columnar? Prior to electronic worksheets, accountants had several pads of paper with a varying number of columns (and rows) preprinted on them. The pads of paper were labeled as columnar pads. The preprinted...
What is NIFO? NIFO is the acronym for next-in, first-out. NIFO is a cost flow assumption, just as FIFO and LIFO are cost flow assumptions. However, NIFO is not acceptable for financial reporting since it calls for a...
What is an adjusted trial balance? Definition of an Adjusted Trial Balance The adjusted trial balance is an internal document that lists the general ledger account titles and their balances after any adjustments have...
What are the typical items reported as current liabilities? Definition of Current Liabilities Current liabilities (also known as short-term liabilities) for most companies are the obligations that must be paid within one...
How do you account for payroll withholdings for health insurance? Definition of Payroll Withholdings for Health Insurance Payroll withholdings for health insurance are the amounts deducted from employees’ pay for their...
What is the difference between income and profit? Definition of Income The term income is used differently by many people. For some, income means the money coming in, such as What is your family income? What is your...
What is an expense? Definition of Expense Under the accrual method of accounting, an expense is a cost that is reported on the income statement for the period in which: The cost best matches the related revenues The cost...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Accounts Payable. Amounts owed but not yet recorded in the Accounts Payable account will need to be accrued through an adjusting entry. The adjusting entry will credit a liability account such as Accrued Expenses...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Bookkeeping Video Training Part 8 Adjusting entries: accrued expenses, reversing the accrual of expenses after the accounting period is over Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
Bookkeeping Video Training Part 2 Accounting equation, why revenue accounts have credit balances, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
a contra-asset account Allowance for Doubtful Accounts for an estimated amount. The Allowance account is a contra-account to Accounts Receivable and the combined balances is referred to as the net realizable value of...
, for its financial statements to comply with the accrual method of accounting it needs to record the following accrual adjusting entry as of December 31 (assuming its billing will take place in early January): debit the...
premium on December 20 for the six-month period beginning 12 days later should result in a debit balance in the asset account __________ Prepaid Insurance. 20. The segregation or separation of duties and the...
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 is the difference between adjusting entries and closing entries? Definition of Adjusting Entries Adjusting entries are made at the end of the accounting period (but prior to preparing the financial statements) in...
debts expense than to show $0. For the depreciation of an asset such as equipment, a company does not know with certainty whether the machine will be useful for 8, 10, 12, or 15 years. As a result, the company might...
What is a bank reconciliation? What is a Bank Reconciliation A bank reconciliation is a process performed by a company to ensure that its records (check register, general ledger account, balance sheet, etc.) are correct....
The supplier of goods or services.
What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
Why is manufacturing overhead allocated to products? Definition of Manufacturing Overhead Allocated to Products Manufacturing overhead refers to the indirect production costs of producing goods, products, component...
What are the advantages of departmentalizing manufacturing overhead costs? The departmentalizing of manufacturing overhead costs allows for better planning and control if the head of each department is held responsible...
What is the difference between prime costs and conversion costs? Cost Categories of a Manufactured Product Prime costs and conversion costs pertain to the three cost categories of a manufactured product: Direct materials...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
What does the direct labor efficiency variance tell us? This variance tells us how efficient the direct labor was in making the actual output that was produced by the direct labor. The direct labor efficiency variance...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
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