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...
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...
, the payment will be a debit of $27,720 to Accounts Payable, a debit of $280 to Purchase Discounts, a credit to Cash for $28,000. Purchase Discounts Lost is an income statement account.] Join PRO to Track Progress Mark...
What is the difference between the current ratio and the acid test ratio? The difference between the current ratio and the acid test ratio (or quick ratio) mainly involves the current assets inventory and prepaid...
, is now on the bank statement, but it is not in the cash account. Therefore, you need to put the check amount into the general ledger. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
What is a rubber check? A rubber check is a check that is not paid (or honored) by the bank on which it is drawn. The reason the check is not paid is the maker’s account had insufficient funds or not sufficient funds...
What is lead time in purchasing? In purchasing, lead time is the estimated time between ordering goods and receiving the goods. For instance, if 100 units of Product X are ordered on April 11 and are expected to be...
are traded on a stock exchange, the earnings per share must appear on the face of its income statement. Example of Earnings per Share Assume a corporation has only one class of common stock outstanding and has no...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to be...
What is the difference between an adjunct account and a contra account? Definition of Adjunct Account An adjunct account is a general ledger account that is related to another general ledger account. The combination of...
What is the difference between par and no par value stock? Definition of Par Value Stock Some states’ laws require or may have required common stock issued by corporations residing in their states to have a par value....
What is gross pay? Definition of Gross Pay Gross pay is the amount an employee is paid before the employer withholds FICA (Social Security and Medicare payroll taxes), income taxes (federal, state, local) if applicable,...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
What is a suspense account? Definition of Suspense Account A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger...
What is a fiscal year? Definition of Fiscal Year A fiscal year is an accounting year that does not end on December 31. (Accounting years of January 1 through December 31 are known as calendar years.) A fiscal year could...
What are invoice payment terms? Definition of Invoice Payment Terms Invoice payment terms appear as part of the information shown on the invoice (or bill) prepared by a seller of goods or a provider of services....
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 three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
as of the date of the bank statement, but were not deposited in time for them to appear on the bank statement Bank errors which resulted in too much withdrawn from the bank account or too little added to the bank...
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
What is a calendar year? Definition of Calendar Year A calendar year is the 12 consecutive months from January through December. In other words, it is the 365 days (366 days in a leap year) beginning on January 1 and...
What is the accounting equation? Definition of Accounting Equation The accounting equation of a sole proprietorship is assets = liabilities + owner’s equity. For a corporation, the accounting equation is assets =...
What is a customer deposit? Definition of Customer Deposit A customer deposit could be money that a company receives from a customer prior to the company earning it (by providing the customer with goods or services). In...
on a multiple-step income statement prior to deducting selling, general and administrative expenses and prior to nonoperating revenues, nonoperating expenses, gains and losses. Example of Gross Profit Let’s assume...
What is the difference between the terms capitalize and depreciate? Definition of Capitalize In accounting, the term capitalize refers to adding an amount to the balance sheet as an asset (as opposed to immediately...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
Is a security deposit a current asset? Definition of Security Deposit A security deposit is often an amount paid by a tenant to a landlord to hold until the tenant moves. The amount of the security deposit is refundable...
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
What is common stock? Definition of Common Stock Common stock refers to the shares of ownership interest in a U.S. corporation. The owners of the common stock are referred to as common stockholders, common shareholders,...
What is a purchase return? Definition of Purchase Return A purchase return occurs when a buyer returns merchandise that it had purchased from a supplier. Since the return of purchased merchandise is time consuming and...
are responsible for the income taxes which pertain to their share of the S corporation’s income. Hence, the income statement of an S corporation does not report income tax expense, and the balance sheet does not...
What is Big 4 Accounting? In accounting, the Big 4 refers to the four largest public accounting and auditing firms: Deloitte PricewaterhouseCoopers (PwC Ernst & Young (EY) KPMG These certified public accounting (CPA)...
is reported on the income statement and the related accounts receivable is reported on the balance sheet (until the receivables are collected). Unfortunately, some customers may not pay the amount owed to the company....
Why is it necessary to allocate a lump sum payment to individual items? It is necessary to allocate a lump sum payment to individual items in order to record a fair portion of the lump sum in each of the proper general...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
of the previous month until the 15th of the current month, we needed to estimate the expense for the second half of the month. For example, when I was preparing his company’s November 30th balance sheet and its...
What is OEM and EOM? OEM is the acronym for original equipment manufacturer. EOM is the acronym for end of month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
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