How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) the...
How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) 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...
How do I determine my payroll tax liabilities? Your payroll tax liabilities will include the following: Federal, state, and local income taxes withheld from employees’ wages, salaries, bonuses, etc. but not yet...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
What items are added to the balance per bank on the bank reconciliation? Bank Reconciliation Adjustments to Bank Balance The items that are added to the balance per bank when doing a bank reconciliation include: Deposits...
What should be the entry when goods are purchased at a discount? Definition of Goods Purchased at a Discount There are two common types of discounts for companies buying goods to resell: Trade discount Early payment...
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
What is the earnings per share (EPS) ratio? Definition of Earnings per Share The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s 1) net income (or earnings) after tax that is...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to be...
What is a calendar year? Definition of Calendar Year A calendar year is the 12 consecutive months from January through December. In other words, it is the 365 days (366 days in a leap year) beginning on January 1 and...
What is lead time in purchasing? In purchasing, lead time is the estimated time between ordering goods and receiving the goods. For instance, if 100 units of Product X are ordered on April 11 and are expected to be...
What is a suspense account? Definition of Suspense Account A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The surcharges...
What is a lease? Definition of a Lease Typically, a lease is a written agreement between an owner of property (land, building, equipment, vehicle, etc.) and a person or business that will use the property for a stated...
What is materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
What is a customer deposit? Definition of Customer Deposit A customer deposit could be money that a company receives from a customer prior to the company earning it (by providing the customer with goods or services). In...
What is preferred stock? Definition of Preferred Stock Preferred stock is a type of capital stock issued by some corporations in addition to its common stock. Preferred stock is also known as preference stock. The word...
What does it mean to report expenses by function? Definition of Reporting Expenses by Function Reporting expenses by function means to classify and report expenses according to the type of activity for which the expenses...
What is net? In accounting, net usually refers to the combination of positive and negative amounts. For example, the amount of net sales is the combination of the amount of gross sales (a positive amount) and some...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
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 a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
In accounting, are debit balances good? It is best if you accept the meaning that the word debit has had for 500 years: a debit is an amount entered on the left-side of an account. Don’t add “good” or “bad” or...
Is AccountingCoach.com based on GAAP or IFRS? The materials presented on AccountingCoach.com are based on U.S. GAAP. Since the accounting materials on AccountingCoach.com are generally introductory concepts, the...
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
What is a purchase return? Definition of Purchase Return A purchase return occurs when a buyer returns merchandise that it had purchased from a supplier. Since the return of purchased merchandise is time consuming and...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Inventory and Cost of Goods Sold (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (39) Marked Wrong (0) Marked Right (0) inventory This current asset reports a retailer’s or manufacturer’s...
Stockholders' Equity (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (39) Marked Wrong (0) Marked Right (0) stockholders' equity (or) shareholders' equity The total of this section of a...
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...
Bonds Payable (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (40) Marked Wrong (0) Marked Right (0) bonds payable These long-term debt securities are likely to require semiannual interest...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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For the past 52 years, Harold Averkamp (CPA, MBA) has
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