An owner’s or stockholders’ equity account with a debit balance instead of the normal credit balance. Examples include the owner’s drawing account, a dividend account, and the treasury stock account.
An owner’s or stockholders’ equity account with a debit balance instead of the normal credit balance. Examples include the owner’s drawing account, a dividend account, and the treasury stock account.
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
This term is used in place of retained earnings when the balance in the retained earnings account is negative (a debit balance).
A revenues account with a debit balance instead of the usual credit balance. Examples include sales returns, sales allowances, and sales discounts.
Means Cash Not Spent If the balance in a company’s Accounts Payable account has increased, accountants will assume that the company did not pay for all of the expenses that were included in the current period’s...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
A financial statement that reports the current year information contained in the general ledger account Retained Earnings. The statement will include the beginning balance, prior period adjustments, net income for the...
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
A multicolumn listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of...
The combined amount of the debit balance in the current asset account Accounts Receivable and the credit balance in the contra asset account Allowance for Doubtful Accounts. The difference between the balances in these...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
is the oldest cost of inventory items likely to remain on the balance sheet? FIFO Wrong. Under FIFO the first or oldest costs come out of inventory first, leaving the most recent costs in inventory. LIFO Right! Under...
’ earnings, and 2) the employer’s portion of the FICA and unemployment taxes. Mark as wrong Mark as right current liabilities This balance sheet classification represents a company’s obligations that are due within...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
To illustrate the calculation of net purchases, assume that a company had the following general ledger account balances at the end of its accounting year: Purchases had a debit balance of $250,000 Purchases Discount had...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
examples when the term carrying amount or carrying value is used: A company’s Accounts Receivable has a debit balance of $84,000. The company’s Allowance for Doubtful Accounts has a credit balance of $3,000. The...
appears on the current month’s bank statement, the check should not be included in the current month’s list of outstanding checks. No other action is needed. The general ledger account has always been correct,...
Loan Repayment A bank loan repayment is likely referring to the loan principal balance (or part of the principal balance) that the borrower is paying the lender (bank). When the principal payment is made, the...
Depreciation Methods Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method Sum-of-the-years’-digits...
reconciliation the outstanding checks are a deduction from the bank balance (or balance per the bank statement). If an outstanding check from the previous month did not clear the bank account in the current month, the...
Returns. This allows the company’s management to see the magnitude of the returns that occurred. The account Purchases Returns is a general ledger account that will have a credit balance (or no balance). Its credit...
account.) The Income Summary is very temporary since it has a zero balance throughout the year until the year-end closing entries are made. Next, the balance resulting from the closing entries will be moved to Retained...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
What is a contra expense account? Definition of Contra Expense Account A contra expense account is a general ledger expense account that will intentionally have a credit balance (instead of the debit balance that is...
is also a contra account to owner’s equity, because the drawing account’s debit balance is contrary to the normal credit balance for an owner’s equity account. At the end of the accounting year, the drawing...
Purchase Allowances or to the account Purchase Returns and Allowances, and 2) a debit of $15 to Accounts Payable. The retailer will combine the debit balance in its Purchases account with the credit balance in Purchase...
will be recorded by the issuing corporation as a debit to Discount on Bonds Payable, a debit to Cash for $9,800,000, and a credit to Bonds Payable for $10,000,000. Over the life of the bonds, the initial debit balance...
Bookkeeping Video Training Part 2 Accounting equation, why revenue accounts have credit balances, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
A constant or unchanging amount that is often used when referring to petty cash. For example, if the petty cash account in the general ledger has an imprest balance of $100, the account balance will be a constant $100....
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
Featured Review
"Just wanted to let you know how much your site helped me tonight. I had to take an Accounting test for a job this evening and, if it weren't for your site, I would have absolutely failed it. I have been a stay-at-home Mom for 12 years, and before that only did a little Accounting here and there (I worked mostly as an Analyst or Auditor prior to kids) so I was REALLY rusty. The topic explanations and quizzes really helped refresh my memory and prepare me for the test. Regardless of whether I get the job or not, I am just psyched at doing well on the exam after all these years. Thanks again!!!" - M.V.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: