for Doubtful Debts Accounting textbooks avoid the use of the word “provision” and instead use the following terminology: The contra-asset account associated with accounts receivable will have the account title...
for Doubtful Debts Accounting textbooks avoid the use of the word “provision” and instead use the following terminology: The contra-asset account associated with accounts receivable will have the account title...
%) Preferred stock cost of $0.7 million ($10 million X 7%) Common stock cost of $7.5 million ($50 million X 15%) Equals a total cost of $9.8 million which divided by $100 million is 9.8% Join PRO to Track Progress Mark...
they are depreciated over their useful lives. The accumulated depreciation for these assets is also reported as part of the property, plant and equipment. The amount of capital expenditures for an accounting period is...
What is meant by owner's draws? Definition of Owner’s Draws Owner’s draws are withdrawals of a sole proprietorship’s cash or other assets made by the owner for the owner’s personal use. The account in which...
What is a favorable variance? Definition of a Variance In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company’s budget for...
. On the other hand, some companies are required by government regulations to end their accounting years on December 31, even though it is not the end of their natural business year. The term fiscal year is associated...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
asset, the business must reduce the amount it reports as working capital (which is current assets minus current liabilities). Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
, for its financial statements to comply with the accrual method of accounting it needs to record the following accrual adjusting entry as of December 31 (assuming its billing will take place in early January): debit the...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
. (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...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
receivable is $92,000. Adjustments to the Allowance account are reported on the income statement as bad debts expense. Now, let’s assume that a company’s inventory has a cost of $15,000. However, at the end of the...
What is a credit balance? Definition of Credit Balance In accounting and bookkeeping, a credit balance is the ending amount found on the right side of a general ledger account or subsidiary ledger account. Examples of...
What is a contingent liability? Definition of Contingent Liability A contingent liability is a potential liability that may or may not become an actual liability. Whether the contingent liability becomes an actual...
When a company writes a check, the company records it with a credit to the Cash account in the company’s general ledger. Whether the check has or hasn’t cleared the bank account, the company’s Cash account...
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...
What are sundry expenses? Definition of Sundry Expenses In accounting and bookkeeping, sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company...
What does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
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 your accounting class Understand your small business...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
to provide the goods or services to the customer or to return the money. Hence, the current liability account Customer Deposits is credited. When the company earns the deposit amount, the current liability will be...
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The bookkeeping equation should always be in balance when double-entry bookkeeping (or accounting) is used. Example of Bookkeeping Equation Assume that Sara Jones starts a sole proprietorship, SJCO, by depositing $900...
that common rules be followed. In the U.S., the common rules are known as generally accepted accounting principles (GAAP), which are established by the Financial Accounting Standards Board (FASB) and the Securities and...
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 net sales? Definition of Net Sales Under the accrual basis of accounting, net sales is the total amount of goods shipped/delivered to customers during a specified period of time minus any early payment...
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...
of depreciation, while the “declining balance” refers to the asset’s book value or carrying value at the beginning of the accounting period. Since book value is an asset’s cost minus its accumulated...
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...
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...
What is contained on a 10-column worksheet? The 10-column worksheet that I am familiar with will have the general ledger account titles in the first column followed by ten columns of amounts. There will be one debit and...
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 a corporation’s assets as dollar amounts (rather than reporting details of all of the assets). If an asset cannot be expressed as a dollar amount, it cannot be entered in a general ledger account. For example,...
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...
to Cash of $10,150,000; a credit to Bonds Payable of $10,000,000; and a credit of $150,000 to Premium on Bonds Payable (an adjunct liability account). Over the life of the bonds, the $150,000 premium is to be accounted...
deducting the cost of goods sold and all other expenses including income tax expense. The calculation is: Net Income after Tax divided by Net Sales. The profit margin ratio is most useful when it is compared to 1) the...
in working capital is important information for the company, its investors, and its creditors. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
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