What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
Where should a business report cash which is restricted to purchase a long-term asset? The cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under the asset...
receives cash of $500 but cannot readily determine the reason why it received the $500. Obviously, the company’s asset Cash is to be debited, but the account to be credited (required by the double-entry system) for...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
; L. Webb, Draws; or L. Webb, Withdrawals. The other part of the entry will reduce the specific business asset. Example of Drawings If the owner (L. Webb) draws $5,000 of cash from her business, the accounting entry will...
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
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...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
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...
that the number of shares has changed and that the par value per share has changed (if the stock has a par value). However, a typical journal entry (one with a debit and a credit) is not needed since the total dollar...
into service until the date of the balance sheet. The account Accumulated Depreciation is a contra asset account because it will have a credit balance. The credit balance is reported in the property, plant and equipment...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
of the page. 1. ABC Co.’s bank statement indicates that its checking account was credited when one of ABC’s customers transferred $500 into ABC’s checking account. How will this be recorded by ABC Co. in its...
See net present value.
Present value.
The par value of common and preferred stock.
An estimate of an asset’s market value
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
by the Financial Accounting Standards Board (FASB). As a result of US GAAP, a corporation’s income statement will be prepared using the accrual method of accounting (as opposed to the cash method). Under the accrual...
The withdrawal of business cash or other assets by the owner for the personal use of the owner. Withdrawals of cash by the owner are recorded with a debit to the owner’s drawing account and a credit to the cash...
corporations may have negative retained earnings, which are reported as a deficit. State laws require corporations to have a positive amount of retained earnings in order to pay cash dividends. It is important to note...
Why does a company prepare a bank reconciliation? Reasons for Preparing a Bank Reconciliation There are several reasons for a company to prepare a bank reconciliation: To safeguard the company’s cash. Performing a bank...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
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...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
profits Issuing common stock or preferred stock for cash Borrowing money on a long-term basis Replacing short-term debt with long-term debt Selling long-term assets for cash In addition to increasing working capital, a...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
Advertising Expense. The accounts for revenues are almost always credited. When a bakery sells its products, it credits Sales. When a bank earns interest on its loans, it credits Loan Interest Revenues. When a company...
will reduce the corporation’s retained earnings which is reported in the stockholders’ equity section of the balance sheet. (A cash dividend also reduces the corporation’s current asset Cash.) Example of a...
in the property’s cost of $1,600,000. A real estate appraisal indicates that the land has a current value of $400,000 and the warehouse building has a current value of $1,200,000. The transaction will be recorded with...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
will decide to also issue preferred stock. Usually the holders or owners of a corporation’s common stock elect the corporation’s directors, vote on significant matters, and enjoy increases in the value of their...
. There will be no depreciation expense recorded after the asset is fully depreciated. No entry is required until the asset is disposed of through retirement, sale, salvage, etc. To illustrate this, let’s assume that a...
to the bank’s balance, the bank reconciliation will not reconcile unless the amount is also included in the company’s general ledger Cash account. To record the bank credit memo the company will debit Cash and...
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