statement will display the amounts for the most recent accounting year and also the amounts for the prior year or two. 38. A corporation’s stockholders’ equity is an excellent indicator of the corporation’s market...
statement will display the amounts for the most recent accounting year and also the amounts for the prior year or two. 38. A corporation’s stockholders’ equity is an excellent indicator of the corporation’s market...
but are not yet in the company’s records. A list of adjustments that are needed to the bank’s records. Common examples are the company’s outstanding checks and deposits in transit which are in the company’s...
What is the difference between liability and debt? Definition of Liability In accounting and bookkeeping, the term liability refers to a company’s obligation arising from a past transaction. Examples of Liabilities A...
of accounting, turnover is used to express the rate at which a company has to replace the employees who leave the company. Examples of Turnover in Financial Ratios The following are a few of the most common financial...
. The monthly entry for $2,000 is often described as a deferral adjusting entry. Definition of Unrecorded Revenue Unrecorded revenue implies that the revenue has been earned, but not yet recorded in a company’s...
, product line, and so on. Nonoperating expenses which pertain to a company’s incidental activities. A common nonoperating expense for a retailer is interest expense. Join PRO to Track Progress Mark the Question as...
. (For an individual, the book balance is likely to be the balance appearing in the person’s check register.) It is common for the book balance to not agree with the balance on the bank statement as of the same day....
on the bank statement. OUTSTANDING NUSAOTNGTID Unscramble OUTSTANDING GTDUNNASOIT Unscramble 2. Deposits made but not yet appearing on the bank statement are deposits in __________. TRANSIT TANTSIR Unscramble TRANSIT...
of details, but still has the correct balance for preparing the company’s financial statements. Example of Control Accounts A common example of a control account is the general ledger account entitled Accounts...
What is the units of activity depreciation? Definition of Units-of-Activity Depreciation The units-of-activity depreciation is unique among the common methods of depreciation in that the useful life of the asset being...
What are gross wages? Definition of Gross Wages Gross wages are the amounts earned by employees before the payroll withholding taxes and other deductions are subtracted. Sometimes gross wages is used to describe the...
. Examples of Journal Entries Even with computerized accounting systems some general journal entries are necessary. Common general journal entries are the adjusting entries. For example, prior to issuing the company’s...
. This is the reason for having an independent person prepare the bank reconciliation. Since electronic deposits and electronic withdrawals (charges) are so common, it is important that the bank reconciliation be...
of a valuation account is that the amount in the main account is not changed, since the needed adjustment(s) are contained in a separate account. Examples of Valuation Accounts A common example of a valuation account is...
and its cost of goods sold. In the U.S. the common cost flow assumptions are FIFO, LIFO, and average. A company’s cost of inventory is related to the company’s cost of goods sold that is reported on the company’s...
part of the total cost increases as an activity increases and it decreases as the activity decreases. Semivariable costs are also referred to as mixed costs. The equation for a semivariable cost is Total Cost = Fixed...
, it is common for half of the annual amount to be paid at the end of each 6-month period (semiannually). Generally, a bond’s stated interest rate is fixed (does not change) for the life of the bond. As a result, the...
not involve a cash payment. As a result, a statement of cash flows prepared under the indirect method will add back the depreciation expense that had been deducted on the income statement. Methods for Computing...
. Accountants will state that the goods produced must absorb the fixed manufacturing overhead costs. It is common that the fixed manufacturing overhead costs are absorbed by the goods produced (or are...
of the common budgeting practice of accepting the past level of an expense and adjusting that amount for the new budget, ZBB starts with $0 and requires that every dollar must be justified to be included in the new...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
. The most common responsibility centers are the numerous departments within a company. Examples of Responsibility Centers Responsibility centers are often categorized by the degree of authority and responsibility given...
Perhaps the most common example of the term amortization is the amortization schedule associated with a mortgage loan. For a 15-year mortgage loan with a fixed interest rate and monthly payments, the amortization...
What are the limitations of the payback period? Definition of Payback Period The payback period is a common (but not the best) tool for screening a company’s potential investments. It uses the potential investment’s...
amount is reported as a liability. After the services are provided, an entry is needed to reduce the liability and to report the revenues. Note that a common characteristic of every adjusting entry will involve at least...
and paid by the corporation. Here are a few of the more common descriptions that will be seen under the direct method: Cash from customers Cash paid to employees Cash paid to suppliers Cash paid for interest The direct...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
with the accrual basis of accounting Fixed asset accounting Cost accounting Budgeting and profit planning, and more Common titles for accountants include corporate accountant, chief accountant, controller, assistant...
. (For companies with operating cycles greater than one year, their current liabilities are the obligations due within the operating cycle.) Typical Current Liabilities Some common examples of current liabilities that...
is credited to this account and then amortized with a credit to interest expense over the life of the bonds. Mark as wrong Mark as right straight-line amortization This is a common method for systematically moving bond...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
are not due within one year of the balance sheet date are reported as a long-term liability. Select... interest principal interest and principal 19. The two main components of stockholders’ equity are paid-in capital...
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...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
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