that the corporation has a separate general ledger cash account for each of its bank checking accounts. It is unusual for the balance in the bank account (balance per bank) to be the same as the balance in the...
that the corporation has a separate general ledger cash account for each of its bank checking accounts. It is unusual for the balance in the bank account (balance per bank) to be the same as the balance in the...
How do I study for an accounting final exam? Here are the AccountingCoach suggestions for studying for an accounting final exam (or other introductory financial accounting exams). Try our free Quizzes Work our free...
How can I get a basic understanding of cost accounting?
How is the material usage variance account reported on the financial statements? Definition of Materials Usage Variance The materials usage variance (in a standard costing system) results from using more or less than the...
Should an owner's compensation be recorded as an expense or in the Drawing account? If the enterprise is a sole proprietorship, the owner’s compensation should be debited to the Drawing account. If the enterprise...
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
Where do you account for payroll taxes on the income statement? Definition of Payroll Taxes Payroll taxes are based on the wages (salaries, commissions, bonuses, etc.) of a company’s employees and on a self-employed...
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 and/or...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
Under accrual accounting, how are worker comp premiums handled? Worker comp insurance premiums should be charged to the areas where the related wages and salaries are charged. Let’s assume that the net cost of worker...
Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
asset Accounts Receivable will decrease and its asset Notes Receivable will increase. 2) A company prepays its insurance. As a result its asset Cash decreases and its asset Prepaid Insurance increases. 3) A company buys...
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...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
How do you account for payroll withholdings for health insurance? Definition of Payroll Withholdings for Health Insurance Payroll withholdings for health insurance are the amounts deducted from employees’ pay for their...
the customer. If the check was sent in error, I would photocopy the check, document on the photocopy what had occurred, and then return it to the customer. If you did not notice the double payment when processing the...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
What is a classified balance sheet? Definition of Classified Balance Sheet A classified balance sheet arranges the amounts from a company’s balance sheet accounts into a format that is useful for the readers. For...
ratios: Debt to equity Debt to total assets In these ratios, debt includes the company’s current and noncurrent liabilities such as: Bonds payable Bank loans Other loans Accounts payable Other amounts owed In a...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
. The retailer can record the delivery surcharges in a separate operating revenue account. In other words the sales revenues account could be used to record the revenues excluding the surcharges and then another sales...
on its products and its allowance for uncollectible accounts receivable will need to be estimates. Providing an estimated amount is better than ignoring reality and reporting a zero amount. I recommend that the...
debit card, the bank’s liability account such as Customer Checking Accounts or Demand Deposits will be reduced. To reduce the normal credit balance in the bank’s liability account, a debit entry is required. The...
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...
current ratio, but may not have liquidity. Hence, the inventory turnover ratio and the accounts receivable turnover ratio can provide insights as to a company’s ability to convert its current assets to cash in time to...
usually had an option to print the liability account balances on the balance sheet without the negative signs. If only one liability account has a negative sign, it is likely that the liability account has a debit...
from Employees. Example of Employee Loan Assume an employee’s car needs an $800 repair and the employee does not have the money. The company employer agrees to give the employee an $800 advance to pay for the repair....
accounts. (However, there could be an entry into the company’s computer system for scheduling the work or shipment, etc.) Reasons for No Accounting Entry When an Order is Received The following is the rationale for no...
customers and accounts as sundry has been eliminated. 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 common stock outstanding. This $600,000 distribution of cash will reduce the balances in two of the corporation’s balance sheet accounts: The current asset account Cash is reduced by $600,000 The stockholders’...
are converted to cash in a timely manner. For example, if a company can better manage its inventory and its accounts receivable, the company’s cash and liquidity will increase. This in turn improves the company’s...
assets in order to determine a company’s working capital. (Dividing current assets by the current liabilities is the company’s current ratio.) Examples of Current Liabilities The following are common examples of...
, seasonal variations will be included. Using only the end of year point for two years is generally not indicative of the inventory levels in the months throughout the year. The 13-point average is also useful for...
A company’s original sales invoice amounts are the source for the company’s gross sales. These amounts are recorded as credit entries in the general ledger account Sales. Any sales returns, sales allowances, and...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
, the second account is to the temporary account Rent Expense which will be debited. The debit to Rent Expense also causes owner’s equity (or stockholders’ equity) to decrease. Eventually, the balances in the...
include: Billing for goods sold or services provided to clients Recording receipts from customers Verifying and recording invoices received from suppliers Paying suppliers Processing employees’ pay and the related...
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...
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