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...
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...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
entry will affect a minimum of two accounts. For example, paying the rent usually means an entry to the account Cash and to the account Rent Expense. In addition, double entry requires that at least one account will be...
! The amounts needed (total current assets and total current liabilities) are reported on the balance sheet. Cash Flow Statement Wrong. Income Statement Wrong. More Than One Will Be Needed Wrong. 3. The operating cycle...
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...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
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...
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...
Where do dividends appear on the financial statements? Definition of Dividends Cash dividends are a distribution of a company’s profits. Financial Statements of a Corporation The main financial statements of a...
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...
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...
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...
What is an account? Definition of Account In accounting, an account is a record in the general ledger that is used to sort and store transactions. For example, companies will have a Cash account in which to record every...
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...
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...
existing equipment Purchasing delivery vehicles Constructing additions to buildings Examples of Capital Budgeting Calculations Capital budgeting usually involves the following calculations for each project: Future...
with a negative balance in its general ledger account Cash: Checking Account. (At the bank, the checking account has a positive balance due to the time it takes for the company’s checks to clear.) In order to avoid...
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...
of the corporation’s cumulative earnings have not been distributed to the corporation’s stockholders in the form of cash dividends. Examples of Reasons for Retained Earnings The following are some examples of the...
’ 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...
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...
Expense will be debited for $1,000 and the account Cash will be credited for $1,000. (When only one account is debited and one account is credited, the entry is referred to as a simple entry.) If the rent of $1,000...
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...
of the following? Select... Balance sheet Cash flow statement View Coaching The heading of the income statement shows the period of time covered (such as the year, quarter, month, 13 weeks, etc.), which is similar to...
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,...
is the __________ __________. 3. Generally a __________ asset is one that will turn to cash or will be used up within one year of the balance sheet date. 4. Plant assets used in the business are reported under the...
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...
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...
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...
, let’s assume that a new company has only one asset, Cash of $10,000, and its owner’s equity is $10,000. The company then pays $500 for advertising that occurs at the time of payment. The company must reduce its...
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...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
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...
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
Is the drawing account a capital account? Definition of Drawing Account A sole proprietorship will have a drawing account in which the owner’s withdrawals or draws of cash or other assets are recorded. The amounts of...
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....
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