The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
What is the difference between receivables and accounts receivable? Definition of Accounts Receivables Accounts receivable are usually current assets that result from selling goods or providing services to customers on...
that the receivable be assigned to them as collateral for the loan. Assigning a specific account receivable usually results in recording the receivable in a separate general ledger account such as Accounts Receivable...
These are the official rules that have been released by the Financial Accounting Standards Board. These are part of the generally accepted accounting principles. Before a standard is released, the public had been able to...
The general guidelines and principles, standards and detailed rules, plus industry practices that exist for financial reporting. Often referred to by its acronymn GAAP. To learn more, see Explanation of Accounting...
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...
liabilities Other accrued expenses Income taxes payable Again, the order will vary. For example, some companies will list Accounts Payable as the first current liability account. Join PRO to Track Progress Mark the...
This is a national organization of certified public accountants. For more information go to www.aicpa.org.
What is the traditional method used in cost accounting? Definition of Traditional Method in Cost Accounting The traditional method of cost accounting refers to the allocation of manufacturing overhead costs to the...
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...
What is the difference between a bookkeeper and an accounting clerk? I envision a bookkeeper as a person employed by a smaller company and being responsible for recording nearly all of its transactions. Hence, the...
General ledger account numbers to be charged Authorizing signatures The voucher is then recorded in the voucher register. The unpaid vouchers provide the detail for the total amount reported as vouchers payable or...
An organization established by the U.S.’s Sarbanes-Oxley Act to oversee the auditors of corporations whose stock is publicly-traded. The PCAOB’s board members are appointed by the Securities and Exchange...
What is the difference in salaries between a bookkeeper and an accountant? I estimate that a bookkeeper’s salary will be less than half of an accountant’s salary. For example, an accountant with a year or two of...
Is Accounts Payable a debit or a credit or both? Definition of an Accounts Payable Credit Since Accounts Payable is a liability account, it should have a credit balance. The credit balance indicates the amount that a...
This series of output by the Financial Accounting Standards Board is part of the board’s conceptual framework project. The original goal in the 1970’s was to articulate the definitions, practices, and rules...
Depreciation for the car’s accumulated depreciation Credit the asset account containing the car’s cost Credit the account Gain on Sale of Vehicles for the amount necessary to have the total of the debit amounts...
What does 2/10 mean in accounting? Definition of 2/10 2/10 is part of an early payment discount that allows a customer or client to pay after the sale or service has been provided. This sales discount allows the...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
that the general ledger account Petty Cash will remain dormant at a constant amount. If the amount of petty cash is $100, then the Petty Cash account will always report a debit balance of $100. This $100 is the imprest...
by the utility after six months of timely payments. The new business will record the deposit with a $500 debit to the current asset account Utilities Deposits and will credit the asset account Cash for $500. The...
Is an entry made for outstanding checks when preparing a bank reconciliation? Definition of Outstanding Checks Outstanding checks are checks written by the company, recorded in the company accounts, but not yet appearing...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
. The retailer can record the delivery surcharges in a separate operating revenue account. In other words the sales revenues account could be used to record the revenues excluding the surcharges and then another sales...
What is float? Definition of Float In accounting and bookkeeping, float is the time between the writing of a check and the time that the check clears the bank account on which it is drawn. Examples of Float Payer...
Why are some plastic cards called debit cards? I assume the name debit card relates to the reduction in the cardholder’s checking account balance at the time that the card is used. The checking account balances of a...
What is a reclassification? Definition of Reclassification In accounting, the term reclassification is often used to describe moving an amount from one general ledger account to another. Examples of Reclassification...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
When a company writes a check, the company records it with a credit to the Cash account in the company’s general ledger. Whether the check has or hasn’t cleared the bank account, the company’s Cash account...
, the second account is to the temporary account Rent Expense which will be debited. The debit to Rent Expense also causes owner’s equity (or stockholders’ equity) to decrease. Eventually, the balances in the...
What is the carrying amount? Definition of Carrying Amount The term carrying amount is also known as book value or carrying value. The term carrying amount is often used when there is a valuation account associated with...
What is a defined contribution pension plan? A defined contribution pension plan is one in which the employer contributes an amount into each eligible employee’s account within an established plan. The employee decides...
appears on the current month’s bank statement, the check should not be included in the current month’s list of outstanding checks. No other action is needed. The general ledger account has always been correct,...
ledger account that reports the cost of the goods that are on the factory floor. In this current asset account are the cost of the direct materials, direct labor and the allocation of manufacturing overhead for the...
debit balances, while the liability and owner’s equity accounts are expected to have credit balances. Therefore, when a company earns revenues, it will debit an asset account (such as Accounts Receivable) and will...
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