What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
on Bonds Payable, Premium on Bonds Payable, and Unamortized Bond Issue Costs. Mark as wrong Mark as right accrued interest expense (or) accrued interest liability This refers to interest that has been incurred but has...
financial statements using the accrual basis of accounting. Will the company’s wages expense for its hourly-paid employees (that is reported on its December income statement) be the same total amount that is reported...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
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...
this topic by reading our Working Capital and Liquidity (Explanation). 1. Working capital is __________ net working capital. The Same As Right! Different From Wrong. 2. The amounts needed to compute a company's...
Bookkeeping Video Training Part 10 Adjusting entries: recap of accruals, deferrals, one balance sheet account and one income statement account will be affected Must-Watch Video Learn How to Advance Your Accounting and...
should normally be reported at its net realizable value. (U.S. income tax rules require conformity between tax and financial reporting. As a result, there are complexities involved.) Join PRO to Track Progress Mark the...
they are depreciated over their useful lives. The accumulated depreciation for these assets is also reported as part of the property, plant and equipment. The amount of capital expenditures for an accounting period is...
What is the difference between unearned revenue and unrecorded revenue? Definition of Unearned Revenue In financial accounting, unearned revenue refers to money received prior to being earned. It is also referred to as...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
Website Services Corp (WSC) completed extensive and unique services for a client and agreed to a single payment of $100,000 to be made two years from now. The client’s financial condition would require it to pay...
for both the payee and for the person writing the check. A check returned as not sufficient funds could be an indication that the financial condition of the maker of the check may be suspect. Example of Not Sufficient...
on the company’s balance sheet as follows: $188,000 as a long-term or noncurrent liability such as noncurrent portion of mortgage loan $12,000 as a current liability such as current portion of mortgage loan When the...
. Others use the term debt to mean only the formal, written loans and bonds payable. Examples of Debt As an example of debt meaning the total amount of a company’s liabilities, we look to the debt-to-equity ratio. In...
that will be turning to cash.) For financial statement purposes the allowance method is the better method since 1) the balance sheet will be reporting a more realistic amount that will be collected from the company’s...
balance is an internal accounting report that merely documents the equality of debits and credits. It is not a financial statement. The trial balance was crucial internal report when the accounting records were...
usually accept a fixed cash dividend that will be paid by the corporation before the common stockholders are paid a dividend. In exchange for this preferential treatment of dividends, the preferred stockholders...
accounting amounts to see how the investments will impact its future Internal rate of return Net present value The discounting of cash flows can be done using computer software, financial calculators, or present value...
are paying interest. However, our agreement did not specify any interest, nor did it state an interest rate. To find the interest rate that is implicit in this arrangement, you need to carry out what’s known as a...
What is the interest coverage ratio? Definition of Interest Coverage Ratio The interest coverage ratio is a financial ratio used as an indicator of a company’s ability to pay the interest on its debt. (The required...
by reading our Nonmanufacturing Overhead (Explanation). 1. Selling expenses should be allocated to the cost of goods sold for external financial reporting. True Wrong. False Right! 2. According to U.S. accounting...
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...
. Software, financial calculators, and online calculators provide a quicker and more accurate answer. Definition of NPV The net present value (NPV) method or model discounts all of the cash inflows and outflows by a...
and development for the future leaders of the company. A disadvantage of decentralization occurs if a subunit makes a decision that is good for the subunit’s financial results, but it results in less than optimal...
classified into three groups: Raw materials used in the product Direct labor used to make the product Manufacturing overhead incurred to make the product Since the manufacturing overhead costs are indirect costs, they...
to maturity) is the interest rate that will discount the interest stream (an ordinary annuity) and the maturity amount (a lump sum) to $287,832. This can be done with software, a financial calculator, or via trial and...
in Allowance for Doubtful Accounts reduces the amount reported on a company’s balance sheet for accounts receivable to the amount that is expected to be collected. The balance sheet account Allowance for Doubtful...
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
of significant noncash changes in the above sections Definition of Free Cash Flow Free cash flow is a metric often used by financial analysts. It is calculated by using two amounts reported on a company’s statement of...
months. Between the interest payment dates, the company will have: Accrued interest income that is to be reported on the income statement Accrued interest receivable that is to be reported on the balance sheet Accrued...
What is historical cost? Definition of Historical Cost Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a transaction. The term historical...
What is the difference between expenses and payments? Definition of Expenses and Payments Under the accrual method of accounting, expenses are costs that have been used up or have been incurred in the process of earning...
What is an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
What is a deferral? Definition of Deferral A deferral often refers to an amount that was paid or received, but the amount cannot be reported on the current income statement since it will be an expense or revenue of a...
What does it mean to rotate stock? Definition of Rotating Inventory Stock To rotate stock means to arrange the oldest units in inventory so they are sold before the newer units. The goal is to avoid losses due to getting...
What is capital stock? Definition of Capital Stock Capital stock refers to the shares of ownership that have been issued by a corporation. The amount received by the corporation when its shares of capital stock were...
What is an escrow payment? An escrow payment is an amount deposited with another party and it is to be released only for its specified purpose. The following is one example of an escrow payment. A borrower and lender...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
What is the entry to remove equipment that is sold before it is fully depreciated? Entries To Record a Sale of Equipment When equipment that is used in a business is disposed of (sold) for cash before it is fully...
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