What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
What is the difference between a bookkeeper and an accountant? Before I provide a distinction, you should be aware that some people use the words interchangeably. Even though I was the accountant, treasurer, and CFO of a...
What is opportunity cost? Definition of Opportunity Cost Opportunity cost is the profit that was lost or missed because of some action or failure to take some action. Some refer to opportunity cost as opportunity lost....
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
When do you put parentheses ( ) around a number? Definition of Amounts in Parentheses Parentheses around a number could have a variety of meanings. For example, parentheses could indicate any of the following: A negative...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
In accounting, what is the meaning of dr.? Definition of Dr. In accounting, dr. is the abbreviation for the Italian term used more than 500 years ago to indicate today’s term debit. In accounting and bookkeeping, debit...
Are utility bills an expense or a liability? Definition of Utility Bills Utility bills are invoices received by a company for the natural gas, electricity, water, and sewer charges that the company used during a previous...
What is a contra revenue account? Definition of Contra Revenue Account A contra revenue account is a revenue account that is expected to have a debit balance (instead of the usual credit balance). In other words, its...
Where do I record the refund of a registration fee? If the registration fee refers to a fee expense that you had originally paid but the amount is now being refunded to you, I would credit the same expense account that...
What is a creditor? Definition of Creditor A creditor could be a bank, supplier or person that has provided money, goods, or services to a company and expects to be paid at a later date. In other words, the company owes...
What does a bookkeeper do? Definition of Bookkeeper A bookkeeper’s role at a company varies by the size and nature of the business. At a very small company without an accountant, the bookkeeper’s duties are likely to...
What is interest payable? Definition of Interest Payable Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. [Interest payable...
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 the difference between entries in a general journal versus a general ledger? Definition of General Journal The general journal is described as the book of original entry. Today the general journal is used to...
What is an account? Definition of Account In accounting, an account is a record in the general ledger that is used to sort and store transactions. For example, companies will have a Cash account in which to record every...
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
What is operating income? Definition of Operating Income Operating income is defined as a corporation’s operating revenues minus its operating expenses. Operating income will be shown as a subtotal on many...
What are interim financial statements? Definition of Interim Financial Statements Interim financial statements report amounts for time intervals that are shorter than a company’s annual financial statements. The...
What is payroll accounting? Definition of Payroll Accounting Payroll accounting involves a company’s recording of its employees’ compensation including: gross wages, salaries, bonuses, commissions, and so on that...
What is a comparative balance sheet? Definition of Comparative Balance Sheet A comparative balance sheet typically has two columns of amounts that appear to the right of the account titles or other descriptions such as...
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 depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
What are accrual adjusting entries? Definition of Accrual Adjusting Entries Accrual adjusting entries or simply accruals are one of three types of adjusting entries which are prepared at the end of an accounting period...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
Is there a difference between work-in-process and work-in-progress? It depends on the user of the terms. Definition of Work-in-Process I use the term “work-in-process” to mean a manufacturer’s inventory that is not...
What is the difference between a ledger and a trial balance? Definition of a Ledger A ledger is often defined as a book of accounts. Today the ledger and its accounts are likely to be an electronic record or file....
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
How does revenue affect the balance sheet? Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts receivable) and an increase in the...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
What is bad debts expense? Definition of Bad Debts Expense Bad debts expense is related to a company’s current asset accounts receivable. Bad debts expense is also referred to as uncollectible accounts expense or...
What are debits and credits? Definition of Debits and Credits Debits and credits are terms used in accounting and bookkeeping systems for the past five centuries. They are part of the double entry system which results in...
What is accrued interest? Definition of Accrued Interest Accrued interest is the amount of loan interest that has already occurred, but has not yet been paid by the borrower and not yet received by the lender. Under the...
Why isn't the direct write off method of uncollectible accounts receivable the preferred method? Definition of Direct Write Off Method Under the direct write off method of accounting for credit losses pertaining to...
Where is accrued income reported in the balance sheet? Definition of Accrued Income Accrued income refers to amounts that have been earned, but the amounts have not yet been received. For example, a corporation may have...
What is inventory change and how is it measured? Definition of Inventory Change Inventory change is the difference between the amount of last period’s ending inventory and the amount of the current period’s ending...
What is equity? Definitions and Examples of Equity Equity has several definitions that pertain to accounting: Equity can indicate an ownership interest in a business, such as stockholders’ equity or owner’s equity....
What is IFRS? IFRS is the acronym for International Financial Reporting Standards. IFRS is used throughout the world except in the United States where U.S. GAAP (generally accepted accounting principles) is followed....
What if a company's Allowance for Doubtful Accounts is understated? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account. The Allowance account’s credit balance is...
Why is Accumulated Depreciation an asset account? Definition of Accumulated Depreciation The account Accumulated Depreciation reports the total amount of depreciation expense that has been recorded from the time the...
Featured Review
"Thank you so much for putting this site together. It's been ten years since I earned my degree in accounting and there's a great deal I've forgotten. So when I signed up with an employment agency and they wanted to do testing, I was very nervous. I did a search and came to your site for a refresher. I ended up getting very high scores and received a job offer. And then the company I was already working for offered me a better position and a 12% pay increase. I'm sure my scores wouldn't have been nearly as good if I hadn't come to this site, so thank you again!" - S.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: