) as a source of the business assets. Example of Owner’s Equity If a sole proprietorship’s accounting records indicate assets of $100,000 and liabilities of $70,000, the amount of owner’s equity is $30,000. Due to...
) as a source of the business assets. Example of Owner’s Equity If a sole proprietorship’s accounting records indicate assets of $100,000 and liabilities of $70,000, the amount of owner’s equity is $30,000. Due to...
What is recorded in the Wages and Salaries Expense account? Definition of Wages and Salaries Expense The account Wages and Salaries Expense (or separate accounts such as Wages Expense or Salaries Expense) are used to...
What is the purpose of depreciation? Purpose of Depreciation The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
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...
Can a fully depreciated asset be revalued? A fully depreciated asset cannot be revalued because of accounting’s cost principle. Definition of a Fully Depreciated Asset A fully depreciated asset is one that has...
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
an account receivable Selling a long-term investment View Coaching For the total amount of working capital to change, there must be a transaction that involves a working capital account and an account that is outside of...
year This term refers to an accounting year that does not end on December 31. fiscal year This term refers to an accounting year that does not end on December 31. Mark as wrong Mark as right matching principle This...
an accounting year it reports the owner’s capital account and the owner’s drawing account. owner's equity This section of a sole proprietor’s balance sheet reports the difference in the amount of a...
capital change when a $10,000 account receivable is collected? The Total Decreases By $10,000 Wrong. The Total Increases By $10,000 Wrong. The Total Remains The Same Right! Cash increased by $10,000 and Accounts...
On credit; not for cash.
A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
on the matching principle, and also 2) maintain depreciation records for the tax return depreciation that is based on the IRS rules. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
, a corporation could instead debit a related account entitled Dividends (or Cash Dividends Declared). However, at the end of the accounting year, the balance in the Dividends account will be closed by transferring its...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
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...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
consists of all of the revenues, gains, expenses, and losses that caused stockholders’ equity to change during the accounting period. The amount of net income for the period is added to retained earnings, while the...
the following: Debit Cash Credit the account(s) that was debited when the check was originally recorded This entry increases the general ledger account Cash (that contains the company’s checking account). It also...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
, fundraising, and management and general The change in net assets resulting from the previous two bullet points The statement of activities will have multiple columns in order to report the amounts for each of the...
increasing from 200,000 shares to 400,000 shares.” Since a stock split does not change the balance in the Common Stock account, a complete journal entry was not required. The memorandum entry merely notes for future...
with its suppliers, the company will have the benefit of having a larger cash balance (even though the amount of working capital will not change). Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
An unfavorable change in the mix of products sold In short, if a company’s contribution margin per unit decreases, the company’s break-even point will increase. Join PRO to Track Progress Mark the Question as Read...
What is a static budget? Definition of Static Budget A static budget is a budget in which the amounts will not change even with significant changes in volume. In contrast to a static budget, a company’s sales...
manufacturing and increased demands from customers, direct labor is no longer the main cost driver of indirect manufacturing overhead. In addition to direct labor, today’s drivers of indirect manufacturing costs...
. Fixed overhead costs are the indirect manufacturing costs that are not expected to change when the volume of activity changes. Some examples of fixed manufacturing overhead include the depreciation, property tax and...
our Break-even Point (Explanation). 1. Fixed Expenses do not change in total when there is a modest change in sales. True Right! The total of a fixed expense is indeed fixed (does not change) as the volume increases or...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
effect on Cash. Another way to remember the effect is that the effect on Cash will be the SAME direction as a change in the liability account balance. An increase in any liability will be a positive amount/effect...
Isn't objectivity violated when estimates are used in bookkeeping and accounting? The use of estimates does not necessarily violate objectivity. If it is not possible to determine the exact amount of an expense...
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