What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
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...
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...
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...
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...
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,...
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...
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...
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...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
A constant or unchanging amount that is often used when referring to petty cash. For example, if the petty cash account in the general ledger has an imprest balance of $100, the account balance will be a constant $100....
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
Usually involves a company’s customers remitting amounts to a bank account close to the customers in order for the company to have collected funds sooner. For example, a company with its headquarters in the...
stock is the result of a corporation repurchasing its own stock and holding those shares instead of retiring them. In the general ledger there will be an account Treasury Stock with a debit balance. (At the time of the...
The owner’s equity account that contains the amount invested in the sole proprietorship by Matt Jones plus the net income since the company began minus the draws made by Matt Jones since the company began. The...
The owner’s equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
A term associated with petty cash. Replenish means to return the amount of actual cash in the petty cash box back to the amount appearing in the general ledger account Petty Cash. This is done whenever the amount of...
What is miscellaneous expense? Definition of Miscellaneous Expense In accounting, miscellaneous expense may refer to a general ledger account in which small, infrequent transaction amounts are recorded. The account...
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...
had a flaw. When the retailer notified the supplier, the supplier requested that the retailer donate or discard the item and the supplier will issue a credit memo for $15. Under a periodic inventory system, the retailer...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
What is a purchase return? Definition of Purchase Return A purchase return occurs when a buyer returns merchandise that it had purchased from a supplier. Since the return of purchased merchandise is time consuming and...
savings account or money market account. The length of a certificate of deposit will vary. It could be for one month, three months, six months, one year, 17 months, three years, etc. Generally the longer the time until...
Revenues for $24,000. During 2024 ABC must move $2,000 each month from the liability account on its balance sheet to a revenue account on its income statement. This deferring of revenue to the periods in which it is...
to be ___________ is listed first. DEBITED IDBTEED Unscramble DEBITED DBTEEID Unscramble 3. In a general journal entry, the account to be _________ is indented. CREDITED DDEICETR Unscramble CREDITED CEEDRTDI Unscramble...
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.
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
A check often referred to as an NSF check, a rubber check, or a check that bounced. It is a check that was not paid by the bank of the issuer (writer) of the check because the checking account of the issuer did not have...
A person or business that has a checking account or savings account at a bank.
An accounting entry with only one account being debited and only one account being credited.
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
A term that refers to a negative checking account balance. It arises when a company writes checks in excess of the amount it has on deposit in its checking account.
Usually refers to a statement from the bank showing the activity in a company’s checking account. The statement includes the deposits received by the bank, checks paid by the bank, bank service charge, and other...
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