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...
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...
per the books. Add To BANK Balance Wrong. The service charge already appears on the bank statement. Deduct From BANK Balance Wrong. The service charge is already deducted on the bank statement. 6. Interest credited to...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
will be recorded with a debit of $4,000 to Accounts Receivable and a credit of $4,000 to Sales Revenues. Definition of Receipts A company’s receipts refers to the cash that the company received. Examples of Receipts...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
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...
is reported as a _________ asset. CURRENT RRUCNET Unscramble CURRENT TCENURR Unscramble 2. Inventory is often reported at the _______ of cost or net realizable value. LOWER ORWEL Unscramble LOWER LEORW Unscramble 3....
Depreciation However, U.S. companies continue to use the term reserve in regards to the accounting for inventories using the LIFO cost flow method. For example, the company will use a contra inventory account entitled...
= the cost of goods sold of $440,000. When there is inflation, the retailer must also elect a cost flow assumption in order to determine the cost of the ending inventory, which of course is a factor in the calculation...
equivalent unit of production under two cost flow assumptions: weighted-average and FIFO. Example of Equivalent Units of Production Assume that a manufacturer uses direct labor continuously in one of its production...
costs and fixed expenses ($18,000 + $12,000 + $1,000). Once the $31,000 has been covered, 70% of the revenues will flow to the company’s net income. Join PRO to Track Progress Mark the Question as Read Must-Watch...
What is the meaning of base year? In accounting, base year may refer to the year in which a U.S. business had adopted the LIFO cost flow assumption for valuing its inventory and its cost of goods sold. Under the...
Why is the accuracy of inventory valuation so important? Definition of Inventory Accuracy Inventory accuracy means the following: Accurate counts of the items in inventory Proper cost of each item in inventory (based on...
%)]. Since bonds are a form of debt, the existing stockholders’ ownership interest in the corporation will not be diluted. Therefore, the future gains from use of the bond proceeds (minus the bond interest payments)...
dollars. Examples of Non-discount Methods of Capital Budgeting One example of a non-discount method is the payback method, since it does not consider the time value of money. The payback method simply computes the...
The amount of cash received is debited to the company’s Cash account If the cash received is greater than the asset’s book value, a Gain on Sale of a Plant Asset is recorded. If the cash received is less than the...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A check that has been written and recorded in the general ledger Cash account, but has not...
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...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
How do you record a dividend payment to stockholders? Definition of Dividend Payment to Stockholders A dividend payment to stockholders is usually a cash payment which reduces the corporation’s asset cash and the...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
Is a security deposit for a rental agreement recorded in a liability account? The person paying the security deposit would credit the asset account Cash and would debit the asset account Security Deposits. The person...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
Are dividend payments shown as an expense on the income statement? Definition of Dividend Payments The cash dividends paid to stockholders are a distribution of the corporation’s earnings. Dividends are not an expense...
balance sheet of December 31 reports current assets of $450,000 and current liabilities of $320,000. The working capital at the final instant of December 31 is $130,000 ($450,000 – $320,000). Even with a significant...
’ equity section of the balance sheet, the cash that was generated from those retained earnings is not likely be in the company’s checking account. Instead, the corporation likely used the cash to acquire additional...
is the __________ __________. 3. Assets that will turn to cash within one year are reported as __________ assets. 4. The use of accounts such as Accounts Payable, Accounts Receivable, and Deferred Revenues are...
the asset Cash to increase by $10,000 and it will cause the liability Notes Payable or Loans Payable to increase by $10,000. The accounting equation remains in balance because both sides of the equation increased by...
by reading our Debits and Credits (Explanation) and Additional Explanation. Use the following information for questions 1 and 2: A company receives $500 of cash as an additional investment in the company by its owner,...
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...
journal: Cash disbursement journal for recording checks written. Cash receipts journal for recording cash sales and other money received. Purchases journal for recording purchases on credit of goods to be resold. (Cash...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
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...
For most industries, a company’s current assets are defined as cash and other assets that will turn to cash or will be used up or consumed within one year of the balance sheet date. If a company is in an industry...
and the updated accumulated depreciation must be removed The cash received must be recorded The difference between the amounts removed in 2. and the cash received in 3. is recorded as a gain or loss on the sale of the...
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
, when a cash dividend or stock dividend is declared. There are many other situations as well. Here are some specific examples when only the left side of the accounting equation is affected. 1) A customer cannot pay an...
face value is used to calculate the cash interest payments required during the life of the bond, and it indicates the cash amount that must be paid at the maturity date. Example of Face Value of a Bond Payable Assume...
How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that...
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