What does per annum mean? Definition of Per Annum Per annum means yearly or annually. It is a common phrase used to describe an interest rate. Often “per annum” is omitted, as in “I have a 4% mortgage loan.” or...
What does per annum mean? Definition of Per Annum Per annum means yearly or annually. It is a common phrase used to describe an interest rate. Often “per annum” is omitted, as in “I have a 4% mortgage loan.” or...
was acquired.) The depreciation entry is an estimate based on the asset’s historical cost, its estimated useful life, and its estimated salvage value. The depreciation entry is an allocation of the asset’s cost, it...
Is the deposit for a booth at a future trade show an asset? The deposit for a booth at a future trade show is an asset until the trade show occurs. Once the trade show occurs the deposit amount should be moved from the...
not be considered to be the fair market value of the business. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
What is an irrevocable letter of credit? Definition of Irrevocable Letter of Credit An irrevocable letter of credit is a financial instrument used by banks to guarantee a buyer’s obligations to a seller. It is...
other than payroll taxes (employers’ share of health insurance, holiday and vacation pay, company contributions to retirement plans, etc.) will also appear on the income statement.] The company’s payroll tax expense...
Where can I find a sample of a cash flow statement? A cash flow statement or statement of cash flows should be presented with a U.S. corporation’s annual financial statements. If a corporation’s stock is publicly...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
assume that at the end of the accounting year the account Eve Jones, Drawing has a debit balance of $24,000. This balance is the result of Eve withdrawing $2,000 per month from her sole proprietorship for her personal...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
What is the difference between assessed value and appraised value? Definition of Assessed Value Assessed value will likely be the amount that a local or state government has designated for individual properties. This...
What is a financial statement? Definition of Financial Statement Generally, the term financial statement could be referring to: General-purpose, external financial reports that are distributed by a company to people...
are paying interest. However, our agreement did not specify any interest, nor did it state an interest rate. To find the interest rate that is implicit in this arrangement, you need to carry out what’s known as a...
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
What is accumulated other comprehensive income? Definition of Accumulated Other Comprehensive Income Accumulated other comprehensive income is a separate line within the stockholders’ equity section of the balance...
What is payroll accounting? Definition of Payroll Accounting Payroll accounting involves a company’s recording of its employees’ compensation including: gross wages, salaries, bonuses, commissions, and so on that...
What does amortization mean? Definition of Amortization In general, the word amortization means to systematically reduce a balance over time. In accounting, amortization is conceptually similar to the depreciation of a...
What is present value? Definition of Present Value In accounting, present value refers to the amount after discounting future cash amounts to the present. The present is depicted on a timeline as the point 0, which is...
these are recorded in accounts such as Purchases, Purchases Returns and Allowances, Purchases Discounts, etc. Must be adjusted at the end of the accounting year in order to report the costs actually in inventory...
amount) discounted by the market interest rate at the time of the bond sale. Example of a Bond Premium A person would buy a bond at a premium (pay more than its maturity value) because the bond’s stated interest rate...
What are LIFO layers? Definition of LIFO Layer LIFO is the acronym for Last-In, First-Out. In the context of inventory, it means that the cost of the most recently purchased units will be the first costs to be matched...
What is the cost of goods sold? Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
What is an annuity in present value calculations? In present value calculations, an annuity is a series of equal cash amounts occurring at equal time intervals. The identical cash amounts are sometimes referred to as...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
Cost on Income Statement Let’s assume that a company buys equipment for $100,000 and it is expected to be used for 10 years with no salvage value at the end of its useful life. Using the straight-line method of...
What is the difference between an accrual and a deferral? Definition of an Accrual An accrual pertains to: expenses that should be reported now, but have not yet been recorded or paid, and revenues that should be...
In adjusting entries, how do I know which T-accounts to use? We illustrate the common adjusting entries with the use of T-accounts in the Explanation of the Topic Adjusting Entries available for your reading at no...
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...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
What is the difference between the current ratio and the quick ratio? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
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 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 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 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 some tips to make learning debits and credits easy? Here are five tips to make learning debits and credits easier: The accounts for expenses are nearly always debited. For example, when a company pays its...
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...
How do you record a payment for insurance? Definition of Payment for Insurance A company’s property insurance, liability insurance, business interruption insurance, etc. often covers a one-year period with the cost...
What is accrued rent? Definition of Accrued Rent Accrued rent is the amount of rent that has not yet been paid by the tenant or received by the landlord for a past period of time. [If the tenant always pays the monthly...
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