How can I learn bookkeeping? You can learn bookkeeping at no cost on our website AccountingCoach.com. We recently expanded our Explanation of Bookkeeping, and we have many other topics that are relevant including debits...
How can I learn bookkeeping? You can learn bookkeeping at no cost on our website AccountingCoach.com. We recently expanded our Explanation of Bookkeeping, and we have many other topics that are relevant including debits...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
What is the difference between an unadjusted trial balance and an adjusted trial balance? Difference between Unadjusted Trial Balance and Adjusted Trial Balance The differences between an unadjusted trial balance and an...
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...
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
What is bad debts? Definition of Bad Debts The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected. (Bad debts is also used for notes receivable that will not be...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
The balance sheet and income statement are connected. Definition of Balance Sheet and Income Statement The balance sheet reflects the accounting equation: Assets = Liabilities + Owner’s (Stockholders’) Equity When a...
What is the double-entry system? Definition of Double-Entry System The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts....
Why is an amount in the cash flows from investing activities shown in parenthesis? An amount shown in parenthesis within the investing activities section of the cash flow statement indicates that cash was used to...
What is the employer matching of FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act, which requires employers to withhold the following from each employee’s paycheck: Social Security...
How do I learn more about the CPA Exam? You can learn more about the Uniform CPA Exam at our free Accounting Career Center. Within our Accounting Career Center are direct links to the state boards of accountancy, CPA...
What are gains? Definition of Gains In financial accounting, gains often pertain to some of a company’s transactions which occur outside of the company’s main business activities. Transactions which are outside of a...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
What is an account payable? Definition of an Account Payable An account payable is an amount owed to a supplier or vendor for goods or services that were provided in advance of payment. However, some people use the term...
What are the disclosures for a manufacturer's inventory? A manufacturer should disclose the following categories of inventory: raw materials, work-in-process, finished goods, manufacturing supplies, and packaging...
What is the debt ratio? Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by...
Would you please explain unearned income? Definition of Unearned Income Unearned income or deferred income is a receipt of money before it has been earned. This is also referred to as deferred revenues or customer...
What is a T-account? Definition of T-Account A T-account is a visual aid used to depict a general ledger account. The account title is written above the horizontal part of the “T”. On the left-side of the vertical...
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 the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
What is an outstanding check? Definition of Outstanding Check An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on...
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
What is work-in-process inventory (WIP)? Definition of Work-in-process Inventory Work-in-process (WIP) inventory pertains to the goods for which the manufacturing has begun, but not yet completed. In other words, WIP is...
What is the meaning of debtor? Definition of Debtor A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed. Example of Debtor If...
What is the gross margin ratio? Definition of Gross Margin Ratio The gross margin ratio is a percentage resulting from dividing the amount of a company’s gross profit by the amount of its net sales. (The gross margin...
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....
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services, and 2) manage...
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...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
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 are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
What is the carrying amount? Definition of Carrying Amount The term carrying amount is also known as book value or carrying value. The term carrying amount is often used when there is a valuation account associated with...
How do you account for payroll withholdings for health insurance? Definition of Payroll Withholdings for Health Insurance Payroll withholdings for health insurance are the amounts deducted from employees’ pay for their...
What is a bank reconciliation? What is a Bank Reconciliation A bank reconciliation is a process performed by a company to ensure that its records (check register, general ledger account, balance sheet, etc.) are correct....
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...
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