a $2,000 deposit in the bank’s night depository after banking hours on June 30. As a result, the company’s Cash account (in its general ledger and referred to as the “books”) as of June 30 shows a positive,...
a $2,000 deposit in the bank’s night depository after banking hours on June 30. As a result, the company’s Cash account (in its general ledger and referred to as the “books”) as of June 30 shows a positive,...
of comprehensive income Statement of cash flows Statement of stockholders’ equity The balance sheet must present the amounts at the final moment of the most recent 2 years. 2. Which of the annual financial statements...
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 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...
What is an outstanding deposit? Definition of Outstanding Deposit An outstanding deposit refers to a company’s receipts (cash, checks from customers, etc.) which have been recorded in the company’s general ledger...
it is assumed that they will not be turning to cash quickly. The quick ratio is calculated by dividing the amount of “quick assets” by 2) the amount of current liabilities. The quick ratio assumes that only the...
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...
What is the time value of money? Definition of Time Value of Money The time value of money recognizes that receiving cash today is more valuable than receiving cash in the future. The reason is that the cash received...
. 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...
What is the difference between gains and proceeds in terms of long-term assets? Definition of Long-term Assets Long-term assets, which are also referred to as noncurrent assets, are assets that generally are not expected...
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...
What type of account is the Dividends account? Definition of Dividends Account When a corporation declares a cash dividend, the amount declared will reduce the amount of the corporation’s retained earnings. Instead of...
could clear (be paid from) the bank account prior to that date. Post-dating a check makes sense only if you are certain that the payee will not cash or deposit the check before the date appearing on the check. Example...
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...
What are dividends? In accounting, dividends often refers to the cash dividends that a corporation pays to its stockholders (or shareholders). Dividends are often paid quarterly, but could be paid at other times. For a...
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...
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...
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...
What is the entry for the down payment from a signed contract? Definition of Down Payment on a Contract A down payment on a signed contract means a company has received money in advance of doing the work specified in the...
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....
a debit balance equal to the cost of the repurchased shares being held by the corporation. The corporation’s cost of treasury stock reduces the corporation’s cash and the total amount of stockholders’ equity. The...
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....
statement when they occur even if payment will take place 30 days later. The accrual method of accounting, which is also known as the accrual basis of accounting, is required for large corporations. (The cash method of...
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...
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...
the Sales account is logical, think of a $100 cash sale. The asset account Cash is debited for $100 and therefore the Sales account will have to be credited for $100. Also the accounting equation will remain in balance...
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...
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)...
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...
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.
.) 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...
The ability to generate cash.
Life insurance without a cash value.
On credit; not for cash.
See cash surrender value.
See discounted cash flow model.
See cash surrender value.
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...
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