the $560 of wages payable that Jane had earned and the company owes as of December 31. (The company’s income statement for the year that ends on December 31 must also report the $560 as part of its wages expense.) The...
the $560 of wages payable that Jane had earned and the company owes as of December 31. (The company’s income statement for the year that ends on December 31 must also report the $560 as part of its wages expense.) The...
Why is a negative cash balance reported as a liability? The following will illustrate why a negative cash balance is reported as a liability instead of being reported as a negative asset amount. Company X writes checks...
to Interest Expense, which is reported on the monthly income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
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...
statement will present an accurate picture of December’s profits and the balance sheet will report the liability for the wages owed as of December 31. Join PRO to Track Progress Mark the Question as Read Must-Watch...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
capital account) increases. Accountants do prepare an income statement or P&L to report the revenues and expenses, but the ultimate effect of a positive amount of profit or net income is to increase the business’s...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
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...
Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
Are fixed assets the same as plant assets? Definition of Fixed Assets and Plant Assets My experience indicates that people use the term fixed assets to mean the same as plant assets. As a result, I define both fixed...
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
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 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 interest expense? Definition of Interest Expense Interest expense is the cost of borrowing money during a specified period of time. Interest expense is occurring daily, but the interest is likely to be paid...
the company’s true amount of cash. Example of an Outstanding Check in the Bank Reconciliation In the bank reconciliation process, the total amount of outstanding checks is subtracted from the ending balance on the...
Are salaried employees entitled to overtime pay? Some salaried employees are entitled to overtime pay. The salaried employees entitled to overtime pay are referred to as nonexempt employees. Nonexempt means that the...
, advertising revenue, interest revenue, etc. The revenue accounts are temporary accounts that facilitate the preparation of the income statement. However, when a corporation earns revenue, it has the effect of...
What is the significance of FOB Shipping Point and FOB Destination? Significance of FOB Shipping Point and FOB Destination The terms FOB shipping point and FOB destination have significance in accounting because they...
adjustments when reconciling the bank statement. For example, if a check is written in December but is voided in January, the Cash account in the company’s general ledger will need to be increased when the check is...
Is AccountingCoach.com based on GAAP or IFRS? The materials presented on AccountingCoach.com are based on U.S. GAAP. Since the accounting materials on AccountingCoach.com are generally introductory concepts, the...
What is the difference between notes payable and notes receivable? Definition of Notes Payable and Notes Receivable Notes payable and notes receivable are both associated with a written note that promises to repay the...
What is the difference between reserve and provision? Definition of Reserve Many decades ago, U.S. accountants decided to eliminate the word reserve when reporting the balances in contra asset accounts. The accounting...
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 a defined benefit pension plan? A defined benefit pension plan is a retirement plan in which the employer commits to paying a specified monthly payment to each eligible employee when he or she retires at a stated...
What is a provision for discounts allowable? The provision for discounts allowable is likely to be a balance sheet account that serves to reduce the asset account Accounts Receivable. The provision account’s counter...
What is the difference between Notes Payable and Accounts Payable? Definition of Notes Payable The account Notes Payable is a liability account in which a borrower’s written promise to pay a lender is recorded. (The...
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires that...
What is the difference between paid-in capital and retained earnings? Definition of Paid-in Capital Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount...
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...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
How do I calculate the cost of goods sold for a manufacturing company? Calculation of the Cost of Goods Sold for a Manufacturer The calculation of the cost of goods sold for a manufacturing company is: Beginning...
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 entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
selling price in the ordinary course of business minus any costs of completion, disposal, and transportation. When the cost of the inventory is reduced to the NRV, the amount of the write down is reported as a loss on...
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
Where is treasury stock reported on the balance sheet? Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet....
Featured Review
"I have been a bookkeeping professional for 16 years. AccountingCoach PRO has been a tremendous resource for me and my team. The material is well organized for studying, and each module's Certificates of Achievement validate learning. I love the tests and quizzes, which test and validate one's knowledge. The different methods of instruction, like flashcards, video tutorials, and printed materials, appeal to all learning styles. The program has allowed me and my team to expand our understanding of accounting and bookkeeping principles and reporting, and to quickly find information when we need to refresh our training on any specific topic. I highly recommend AccountingCoach’s programs to anyone in the bookkeeping industry, or who owns a bookkeeping business. The entire team can benefit from the program. Thank you, AccountingCoach!" - Sal R.
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: