as follows: Credit to its Land account for its cost of $200,000 Debit to its Cash account for the $500,000 it received Credit to the income statement account Gain on Sale of Real Estate for $300,000 Join PRO to Track...
as follows: Credit to its Land account for its cost of $200,000 Debit to its Cash account for the $500,000 it received Credit to the income statement account Gain on Sale of Real Estate for $300,000 Join PRO to Track...
How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that...
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,...
reconciliation the outstanding checks are a deduction from the bank balance (or balance per the bank statement). If an outstanding check from the previous month did not clear the bank account in the current month, the...
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...
Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
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 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...
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,...
with the principal balance in the lender’s records. This can be confirmed on a loan statement from the lender or by asking the lender for the principal balance. Join PRO to Track Progress Mark the Question as Read...
What is annualizing? Definition of Annualizing Annualizing means taking a partial year amount and converting it to a full year amount. We will use several examples to illustrate how this works. Examples of Annualizing A...
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 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...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
. If any of the items recorded in Sundry Expenses begin to occur frequently and/or become significant, a new account should be opened for such items. Sundry expenses could also refer to a line on a company’s...
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 are some examples of financing activities? Definition of Financing Activities Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement...
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
, plant and equipment for a cash amount that is less than the carrying amount (or book value) of the asset sold. Nonoperating expenses and losses are often reported on the income statement after the subtotal Income from...
A credit is not a normal balance for what accounts? Definition of Credit Balance A credit balance refers to the balance on the right side of a general ledger account or T-account. Normally, the liability and owner’s...
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...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is a lease? Definition of a Lease Typically, a lease is a written agreement between an owner of property (land, building, equipment, vehicle, etc.) and a person or business that will use the property for a stated...
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...
, 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 materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
on the income statement of a retailer or manufacturer. The cost flow (FIFO, LIFO, etc.) will have an effect on the amount. cost of goods sold (or) cost of sales This is usually the largest expense on the income...
on notes receivable by using the straight-line method is $__________ $2,000 Discount of $4,000 divided by 2 years.. 18. If the $4,000 of discount is a significant amount in light of Company X's net income and other...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The accounting equation is similar to the format of which financial statement? Select... balance sheet...
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...
of discount divided by 2 years.. 18. If the $3,000 of discount is a significant amount in light of Company X's net income and other financial information, the __________ effective interest rate method of...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Generally an __________-type adjusting entry will cause revenues to be reported on the...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Do I buy a new machine or use an old one? One technique for deciding whether to buy a new machine or to use an old machine is to look at the future cash flows if you buy a new machine and the future cash flows if you use...
What are production costs? Definition of Production Costs In managerial accounting and cost accounting, production costs are the costs that occur in the manufacturing facilities. Production costs are also referred to as...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
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