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...
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...
A balance sheet liability account that reports amounts received in advance of being earned. For example, if a company receives $10,000 today to perform services in the next accounting period, the $10,000 is unearned in...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
The inventory system where purchases are debited to the inventory account and the inventory account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in the inventory account is...
How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) the...
for a corporation to make a dividend payment: The corporation’s board of directors must declare the dividend, and The corporation must distribute the cash Example of Recording a Dividend Payment to Stockholders On the...
are decreased with a ________. DEBIT EBITD Unscramble DEBIT ITBED Unscramble 2. A credit will increase the balance in a _________ account. REVENUE NEREVEU Unscramble REVENUE EUVEENR Unscramble 3. Credits are entered on...
What is an overdraft? Definition of Overdraft An overdraft (also known as a bank overdraft) generally means that the amount of a company’s checks being presented at the bank for payment exceeded the amount on deposit....
Statement Assume that an online seller begins operations on January 2 by purchasing $5,000 of goods consisting of 1,000 items which cost $5 each. The goods are going to be sold for $12 each. There are two common ways to...
When does a negative cash balance appear on the balance sheet? Definition of Negative Cash Balance A negative cash balance results when the cash account in a company’s general ledger has a credit balance. The credit or...
account balances are then transferred to the Retained Earnings account. When the year’s revenues and gains exceed the expenses and losses, the corporation will have a positive net income which causes the balance in...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
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...
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...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. An entry on the right side of a T-account. Select... Debit Credit 2. This will increase the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A check that has been written and recorded in the general ledger Cash account, but has not...
This is a long term asset account that accumulates the cost of a project that has not yet been placed into service. When the project is finished and placed into the service, the cost is removed from this account and is...
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
A liability account that reports amounts received in advance of providing goods or services. When the goods or services are provided, this account balance is decreased and a revenue account is increased. To learn more,...
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.
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
What is the accounting journal entry for depreciation? Definition of Journal Entry for Depreciation The journal entry for depreciation is: Debit to the income statement account Depreciation Expense Credit to the balance...
a debit entered on the left side of a general ledger account. (There will also need to be a credit amount entered on the right side of another account.) The abbreviation for debit is dr. (which is also related to the...
. The amount owed by customers are included in the balance of the current asset account Accounts Receivable. In other words, the terms bad debt and doubtful debt have the same meaning. Example of Bad Debt and Doubtful...
of the accounts will receive a debit entry and at least one other account will receive a credit entry. Further, the amounts entered as debits must be equal to the amounts entered as credits. You should think of a debit...
How many days after a month ends should the bank reconciliation be done? Definition Bank Reconciliation The bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking...
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...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
How, when and why do you prepare closing entries? Definition of Closing Entries Closing entries transfer the balances from the temporary accounts to a permanent or real account at the end of the accounting year. As a...
What does it mean to reclassify an amount? Definition of Reclassify an Amount To reclassify an amount likely means to move an amount from one general ledger account to another general ledger account. Example of...
the following: Debit Cash Credit the account(s) that was debited when the check was originally recorded This entry increases the general ledger account Cash (that contains the company’s checking account). It also...
accounts to a balance sheet account such as a corporation’s Retained Earnings account When recording a reversing entry for a previous accrual adjusting entry involving an expense When recording a deferral adjusting...
with a negative balance in its general ledger account Cash: Checking Account. (At the bank, the checking account has a positive balance due to the time it takes for the company’s checks to clear.) In order to avoid...
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...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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