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. Expressed another way, to rotate the stock of goods on hand means that the physical flow of goods will result in the first or oldest goods being sold first. However, the accounting cost flows do not have to agree with...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
presently shown as a current liability. The amount reported as a current liability plus the amount reported as a long term liability must be equal to the total amount owed on the debt. Join PRO to Track Progress Mark...
will list the types and amounts of the capital stock. 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...
an accounting adjusting entry in which the account Depreciation Expense is debited and the contra asset account Accumulated Depreciation is credited. Effects of Depreciation The following are some of the effects for a...
must match each employee’s Medicare tax of 1.45% (but does not match the employee’s Additional Medicare Tax). Information on the Additional Medicare Tax can be found at www.irs.gov. Join PRO to Track Progress Mark...
income tax on the additional $6. 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 skills...
accounts to a balance sheet account such as a corporation’s Retained Earnings account When recording a reversing entry for a previous accrual adjusting entry involving an expense When recording a deferral adjusting...
cash accounts and their total reported as Cash or as Cash and cash equivalents as the first current asset. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
What is going concern? Definition of Going Concern The going concern assumption is a basic underlying assumption of accounting. For a company to be a going concern, it must be able to continue operating long enough to...
What is the monthly close? Definition of Monthly Close In accounting, monthly close is a series of steps and procedures that are followed so that a company’s monthly financial statements are in compliance with the...
What is a journal? Definition of a Journal In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry. The...
. As a result, the general ledger is expected to have the total amount of debits equal to the total amount of credits. Further, when the account balances are listed on a trial balance, the totals should be equal....
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
What is an ordinary annuity? Definition of Ordinary Annuity In accounting, an ordinary annuity refers to a series of identical cash amounts with each amount occurring at the end of equal time intervals. Another term for...
What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
starting next year. Because of this assurance, the utility will record the $300,000 as a deferred asset. In each of the five subsequent years, the utility will credit the deferred asset account for $60,000 and will...
. (This is the $20 of gross wages per hour plus the $9.04 fringe benefit cost per hour.) Similarly, the employee is earning $29.04 for every hour worked. Join PRO to Track Progress Mark the Question as Read Must-Watch...
of goodwill and a resulting impairment loss reported on the company’s income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
be found at www.irs.gov. 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 skills to...
. The entry will debit Loan to Employee for $5,000 and will credit Cash for $5,000. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by debiting Interest...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
report that is/was useful in a manual accounting system. If the trial balance did not “balance” it signaled an error somewhere between the journal and the trial balance. Often the cause of the difference was a...
The debit of $1,000 in the Purchases account and the credit of $200 in the Purchases Returns will mean that for this transaction the company had net purchases of $800. Join PRO to Track Progress Mark the Question as...
Is an entry made for outstanding checks when preparing a bank reconciliation? Definition of Outstanding Checks Outstanding checks are checks written by the company, recorded in the company accounts, but not yet appearing...
What is an uncleared cheque? Definition of Uncleared Cheque An uncleared cheque is a cheque (check) that has been written and recorded in the payer’s records, but has not yet been paid by the bank on which it is drawn....
. 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 skills to re-enter the workforce Pass...
are recorded in a contra revenue account such as Sales Discounts. Hence, its debit balance will be one of the deductions from sales (gross sales) in order to report the amount of net sales. Example of Sales Discounts To...
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a promissory note. This results in the company replacing its account payable with a note payable, and the supplier replacing its account receivable with a note receivable. Join PRO to Track Progress Mark the Question as...
What is a source document? Definition of Source Document A source document is an original record which contains the detail that supports or substantiates a transaction that will be (or has been) entered in an accounting...
cycle is longer than one year, the length of the operating cycle is used in place of the one-year time period. Examples of Current Assets Assets that are reported as current assets on a company’s balance sheet...
. 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 skills to re-enter the workforce Pass...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
, to reduce rent, etc. To satisfy stockholders who prefer appreciation in the value of the corporation’s common stock instead of receiving cash dividends that require current income tax payments Join PRO to Track...
for a total of $2,000 and the stock’s par value is $1 per share, the accounting entry is a debit to Cash for $2,000 and a credit to Common Stock—Par $100, and a credit to Paid-in Capital in Excess of Par for...
. In the U.S. the interest paid to the bondholders by the corporation is a deductible expense on the corporation’s income tax return. Typically businesses do not issue bonds. Join PRO to Track Progress Mark the...
for interest expense, and payments for income taxes. 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...
of the accumulated depreciation that pertains to these assets. 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...
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