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...
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...
amount not expected to be collected within one year is a noncurrent or long term asset. It is common for the loan to an employee to specify an interest rate and a schedule of payments. Entry to Record a Loan to Employee...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
expense during the years that the asset is used in the business. Salvage value is also referred to as disposal value, residual value, or scrap value. Example of Asset Salvage Value Perhaps the most common calculation of...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A listing of the account numbers and titles but without account balances is the __________...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
This account is a contra long-term asset account which is credited for the depreciation associated with land improvements. As an asset account, the accumulated depreciation account balance does not close at the end of...
to pay at a later date, the company records the sale with a debit to Accounts Receivable and a credit to the revenue account Sales. The Sales account is a temporary account used to keep a tally of the sales made during...
What is double-entry bookkeeping? Definition of Double-Entry Bookkeeping Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least...
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...
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...
type of account? Select... Current asset Current liability Income statement 25. If a U.S corporation’s shares of stock are traded on a stock exchange, which report will contain management’s discussion of the...
What is the provision for bad debts? Definition of Provision for Bad Debts The provision for bad debts could refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts,...
What is the procedure for preparing a trial balance? Definition of a Trial Balance A trial balance consists of the following information: The title of each general ledger account that has a balance To the right of the...
A record of the details to support a general ledger account. The general ledger account is often referred to as the control account. For example, the accounts receivable subsidiary ledger provides the details to support...
A temporary account that is debited when cash dividends have been declared (instead of debiting the Retained Earnings account. At the end of the accounting year, the balance in this account is transferred to the Retained...
Why are assets and expenses increased with a debit? Definition of Debit In accounting the term debit indicates the left side of a general ledger account or the left side of a T-account. (The right side of an account or a...
Bookkeeping Video Training Part 1 Accounts: record each transaction in two accounts, debits = credits, T-accounts, amounts reported on financial statements Must-Watch Video Learn How to Advance Your Accounting and...
will be in the corporation's checking account. Often the retained earnings will end up in long-term assets as a profitable corporation seeks to expand or improve its business operations. Some corporations will use...
Which accounts normally have debit balances? Definition of Debit Balance In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by...
What does double entry mean? Definition of Double Entry In accounting, double entry means that every transaction will involve at least two accounts. Double entry also requires that one account be debited and the other...
the Cash account for $800. Since every entry must have debits equal to credits, the company will need to debit another account for $800. In this case, the account is Rent Expense. (Eventually the debit balance in the...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the delivery employees have earned during the accounting period indicated in the heading of the...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the warehouse employees have earned during the accounting period indicated in the heading of the...
A liability account that reports an insurance company’s premiums received from its insured that have not yet been earned. For example, if the insurance company receives $600 on January 27 for an insured’s...
This is a contra long-term asset account which is credited for the depreciation associated with Buildings. Since it is a balance sheet account, the accumulated depreciation account balance does not close at the end of...
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...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
The inventory system where purchases are debited to the inventory account and the inventory account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in the inventory account is...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
A balance sheet liability account that reports amounts received in advance of being earned. For example, if a company receives $10,000 today to perform services in the next accounting period, the $10,000 is unearned in...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
for a corporation to make a dividend payment: The corporation’s board of directors must declare the dividend, and The corporation must distribute the cash Example of Recording a Dividend Payment to Stockholders On 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...
What is meant by accounts written off? Definition of Accounts Written Off Accounts written off is likely referring to accounts receivable that a company deemed to be uncollectible and were removed from the general ledger...
What is an overdraft? Definition of Overdraft An overdraft (also known as a bank overdraft) generally means that the amount of a company’s checks being presented at the bank for payment exceeded the amount on deposit....
are decreased with a ________. DEBIT EBITD Unscramble DEBIT ITBED Unscramble 2. A credit will increase the balance in a _________ account. REVENUE NEREVEU Unscramble REVENUE EUVEENR Unscramble 3. Credits are entered on...
What would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
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