preferred stock in addition to its common stock.] Generally, the holders of common stock: Elect the corporation’s board of directors Vote on mergers Participate in increases and decreases in the market value of the...
preferred stock in addition to its common stock.] Generally, the holders of common stock: Elect the corporation’s board of directors Vote on mergers Participate in increases and decreases in the market value of the...
and disposal. net property, plant and equipment. The recorded costs of the tangible noncurrent assets used in the business minus the related accumulated depreciation. accounts receivable, net. The recorded amount of...
. Therefore, to reduce the credit balance, the expense accounts will require debit entries. Example of Rent Expense as a Debit If a company pays $800 for the current month’s rent, the company’s assets and its...
because of insufficient funds A transfer of funds to another account at the bank The bank’s use of the term debit memo is logical because the company’s bank account is a liability in the bank’s general ledger....
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
be calculated by discounting the bond’s future cash amounts (semiannual interest payments and the maturity amount) back to the amount of cash paid to buy the bond (the present value). Example of Actual or Real...
in exchange for cash or other assets. Donated capital was received. Here is a list of items that could cause a decrease in the total amount of a corporation’s stockholders’ equity: Negative net earnings or a net...
the current asset Cash and to decrease the current asset Accounts Receivable. Note that no revenue is reported when the $850 is received on January 8 and there is no effect on HRS’s net income. Remember there is a...
the payee $124, the company should contact the the payee to cash the check. (If the check is not cashed within a certain number of years, the company will have to remit the amount of the uncashed check to its state...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
What is a customer deposit? Definition of Customer Deposit A customer deposit could be money that a company receives from a customer prior to the company earning it (by providing the customer with goods or services). In...
Why is income received in advance a liability? Definition of Income Received in Advance Under the accrual method of accounting, when a company receives money from a customer prior to earning it, the company will have to...
day, but the balance sheet amounts represent the amount at the instant or moment after all of the transactions of the specified day have been recorded. We avoid saying that the balance sheet is for the day, since the...
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
This system requires that every business transaction must affect at least two general ledger accounts, and the debit amounts must be equal to credit amounts. Mark as wrong Mark as right owner's draw (or)...
Bank Reconciliation Bank Reconciliation The bank reconciliation is also known as the bank statement reconciliation or the bank rec. In accounting, a corporation’s checking account is considered to be part of its cash...
will be occurring automatically when using accounting software: Cash will be credited whenever a check is written Cash will be debited when money is received Accounts Receivable will be debited when a sales invoice is...
.) Therefore the preferred stock is not likely to see an increase in dividends. On the other hand, the dividends on the common shares of stock will be determined and declared by the board of directors. Hence, in the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
See discounted cash flow model.
See cash surrender value.
On credit; not for cash.
The ability to generate cash.
See cash surrender value.
Life insurance without a cash value.
Cash received. Receipts are different from revenues.
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...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
statement. US GAAP requires corporations to report/disclose the amount of income taxes paid (as well as the amount of interest paid). Example of Where the Income Taxes Paid is Reported The amount of income taxes...
a person writing checks and someone other than a person recording amounts in the company’s general ledger. Another example of the segregation of duties is that the person handling cash is not the person recording the...
, the expense will be recorded as part of the entry. When the company pays the invoice, the balance in Accounts Payable is reduced and the balance in the company’s Cash account is reduced. The payment does not affect...
. Depreciation, depletion and amortization are also described as noncash expenses, since there is no cash outlay in the years that the expense is reported on the income statement. As a result, these expenses are added...
How should the sale of gift certificates be recorded in the general ledger? Definition of Gift Certificates Gift certificates (and gift cards) are often sold by a retailer to a buyer for cash. The buyer can then redeem...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
by the utility after six months of timely payments. The new business will record the deposit with a $500 debit to the current asset account Utilities Deposits and will credit the asset account Cash for $500. The...
. The landlord requires a security deposit of $1,000. The company debits the long-term asset Security Deposit for $1,000 and credits Cash for $1,000. The landlord debits Cash for $1,000 and credits a liability account...
Should receipts be recorded using the date the money was received or the date the money was deposited in the bank accounts? Cash receipts should be recorded with the date the money was received. For example, a church...
What are sales discounts? Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. Sales discounts...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
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