another way, an automobile loan payment consists of two components: an interest payment and a principal payment. While the loan payment is a cash outflow or an expenditure, only the interest portion is an expense that...
another way, an automobile loan payment consists of two components: an interest payment and a principal payment. While the loan payment is a cash outflow or an expenditure, only the interest portion is an expense that...
adjustments when reconciling the bank statement. For example, if a check is written in December but is voided in January, the Cash account in the company’s general ledger will need to be increased when the check is...
the asset and the liability to the credit card company should be recorded as of December 30. When the business pays the credit card company (perhaps 30 days later), the business will be reducing its cash and its...
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
The revenue classification used by nonprofit organizations to account for the amounts received as donations. It is also an expense classification for the donations made to another nonprofit organization. Contributions...
. The payment for the equipment is to be made on February 10. Under the accrual method, on December 29 the company should debit the asset account Equipment and credit the liability account Accounts Payable. (When the...
What is the difference between assets and fixed assets? Assets are resources owned by a company as the result of transactions. Examples of assets are cash, accounts receivable, inventory, prepaid insurance, land,...
are also referred to as permanent accounts. Examples of Real Accounts The real accounts are the balance sheet accounts which include the following: Asset accounts (cash, accounts receivable, buildings, etc.) Liability...
Stock and will credit the account Cash.) 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 current job Refresh your...
as right dividend (or) cash dividend This is a distribution of part of a corporation’s earnings to its stockholders. dividend (or) cash dividend This is a distribution of part of a corporation’s earnings to its...
method of accounting (or) accrual basis of accounting This accounting method reports revenues when they are earned (as opposed to when the cash is received) and reports expenses when they occur (as opposed to when they...
receivable Statement of cash flows View Coaching An aging (also spelled ageing) of accounts receivable is an internal report (not a financial statement) that lists each customer having a balance in a company’s...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
closer to the time of the sale or service, and The balance sheet will report a more realistic net amount of accounts receivable that will actually be turning to cash The allowance method can be applied in one or both of...
to the date of the sale. Next, the asset’s cost and its accumulated depreciation are removed from the accounts. Any money received is debited to Cash and any gain or loss on the sale is also recorded.] Example of a...
What is net realizable value? Definition of Net Realizable Value Net realizable value (NRV) is the cash amount that a company expects to receive. Hence, net realizable value is sometimes referred to as cash realizable...
that on December 31, a company paid $12,000 for a maintenance agreement covering the next 12 months. The transaction was recorded on December 31 with a debit of $12,000 to the current asset Prepaid Expense and a credit...
under the heading of other income. Calculating a Gain To illustrate the calculation of a gain, let’s assume that the retailer sells its old van for $5,000 cash. At the time of the sale the van is on the retailer’s...
as an annual amount per unit or as a percentage of an item’s cost. The calculation of the cost to store inventory should be the incremental annual costs or the company’s opportunity costs. In other words, if a...
entry to record this information is: Debit: Cash for $107,000 Credit: Sales (or Sales Revenues) for $100,000 Credit: Sales Taxes Payable for $7,000 When the company remits the $7,000 to the state, the company will...
liabilities when they come due. For example, if a company’s current assets consist mainly of slow-moving inventory and some slow-paying accounts receivable, the company may not be able to convert its current assets to...
a negative balance. This will also result in bank fees for the company and the endorser/payee. It also signals to the endorser/payee that the company has a cash flow problem. The checks being presented are not...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
's or stockholders' equity will be too high Note: There was no change in AVCO’s cash as of December 31. 5. JOYCO (who uses the periodic inventory method) receives a vendor’s invoice with credit terms of...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
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...
statement, statement of comprehensive income, statement of stockholders’ equity, and statement of cash flows) which report the amounts that occurred during a period of time such as the year ended December 31, 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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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.
such as Cash, Accounts Receivable, and Equipment are examples of __________ accounts which will be reported on the balance sheet. 4. Notes Payable, Accounts Payable, and Wages Payable are examples of __________ accounts...
from your company for the annual insurance premium covering the twelve-month period beginning on December 1. XYZ Insurance Co. recorded the $2,400 receipt as of December 1 with a debit to the current asset Cash and a...
Which financial statement shows a corporation's worth? Not one of the financial statements will show a corporation’s worth. The balance sheet, income statement, statement of cash flows, and stockholders’ equity...
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