Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
What is a dividend and why is it needed? A dividend paid by a corporation is a distribution of profits to the owners of the corporation. The owners of a corporation are known as stockholders or shareholders. (In a sole...
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...
Are undeposited checks reported as cash? Undeposited checks that are not postdated (not dated with a future date) are reported as cash. Accountants define cash as more than just currency and coins. For example,...
What is a transposition error? Definition of Transposition Error A transposition error occurs when an amount is recorded incorrectly as the result of switching the positions of two (or more) digits. The switching of the...
What is a credit balance? Definition of Credit Balance In accounting and bookkeeping, a credit balance is the ending amount found on the right side of a general ledger account or subsidiary ledger account. Examples of...
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
What does it mean to check the extensions and to foot an invoice? To check the extensions on a purchase invoice means to verify that the number of units of each item multiplied by its unit cost agrees with the total...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
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...
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
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...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
Why aren't retained earnings distributed as dividends to the stockholders? Definition of Retained Earnings Retained earnings is one component of the stockholders’ equity section of a corporation’s balance sheet. Some...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
account Inventory is reduced through a credit to a contra inventory account, which is referred to as a valuation account. The debit in the entry to write down inventory is recorded in an account such as Loss on...
year with a zero balance. The temporary accounts include the income statement accounts (revenue, expense, gain, loss, income summary) and also the drawing account of a sole proprietorship. The balances in these accounts...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
flow assumption from FIFO to the LIFO because they were experiencing rising costs. By flowing the recent higher costs into the cost of goods sold on the income statement and tax return (and keeping the older lower costs...
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 the difference between stockholder and stakeholder? Definition of Stockholder A stockholder or shareholder is the owner of shares of a corporation’s common or preferred stock. Definition of Stakeholder A...
What is the difference between information and data? I was taught that information is useful data. The point is there are lots of data (plural of datum) everywhere, and most of the data will not be useful to a decision...
What is the monetary unit assumption? Definition of Monetary Unit Assumption The monetary unit assumption as it applies to a U.S. corporation is that the U.S.dollar (USD) is stable in the long run. That is, the USD does...
What is a bond sinking fund? Definition of Bond Sinking Fund A bond sinking fund is a corporation’s noncurrent asset that is restricted for the purpose of redeeming or buying back its bonds payable. Bonds that require...
computed using replacement costs. This smaller amount of costs charged to the income statement means reporting greater profit. The difference in the profit is said to be illusory. In the case of plant assets used during...
What does the term organic growth mean? Organic growth often refers to the growth in a company’s sales that did not occur because of an acquisition of another company. Expressed another way, organic growth is...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
What are sales discounts? Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. Sales discounts...
receivable is $92,000. Adjustments to the Allowance account are reported on the income statement as bad debts expense. Now, let’s assume that a company’s inventory has a cost of $15,000. However, at the end of the...
What is the days' sales in accounts receivable ratio? Definition of Days’ Sales in Accounts Receivable The days’ sales in accounts receivable ratio (also known as the average collection period) tells you the number...
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....
What is revenue? Definition of Revenue Revenue is the amount a company receives from selling goods and/or providing services to its customers and clients. A company’s revenue, which is reported on the first line...
What are the stockholders' equity accounts? The stockholders’ equity accounts are balance sheet accounts and a part of the accounting equation Assets = Liabilities + Stockholders’ Equity. In this light you can view...
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....
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
What is the difference between an invoice and a voucher? Definition of an Invoice An invoice received from a vendor is a billing for goods or services that it had provided. The vendor’s invoice will include the...
cost or fixed expense. Fixed expenses such as depreciation expense and property insurance expense are reported on a company’s income statement. Understanding which costs are fixed and which are variable is important...
Are bonds payable reported as a current liability if they mature in six months? Definition of Bonds Payable Bonds payable are formal, long-term obligations that promise to pay interest every six months and the principal...
What is the double declining balance method of depreciation? Definition of Double Declining Balance Method of Depreciation The double declining balance method of depreciation, also known as the 200% declining balance...
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