Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
What is the difference between liquidity and liquidation? Definition of Liquidity Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a...
. DISCONTINUED NOUDISDETCIN Unscramble DISCONTINUED NDDOSUNEITCI Unscramble 15. If a corporation sells a plant asset for less than its ___________ value, the difference will be reported as a loss on the income statement....
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
What is solvency? Definition of Solvency I use the term solvency to mean a company is able to 1) pay its obligations when they come due, and 2) continue in business. Some people look to a company’s working capital to...
What is an unsecured creditor? Definition of Unsecured Creditor An unsecured creditor is often a vendor or supplier that: Shipped goods to a customer as part of a sale on credit Has not been paid Does not have a lien on...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
A dollar adjusted for inflation. If an asset such as land was purchased for $10,000 many years ago when the consumer price index (CPI) was 100 and today the CPI is 400, today’s constant-dollar amount would be...
Are repairs to office equipment an expense? Repairing and maintaining office equipment is an immediate expense. This is true even if the repair cost is a very large amount. If a large expenditure is made to improve...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
of a bond is referred to as the __________ of bond premium. 5. Discount on Bonds Payable is a __________-liability account. 6. When calculating the present value of the interest payments of a bond, the interest payments...
, for its financial statements to comply with the accrual method of accounting it needs to record the following accrual adjusting entry as of December 31 (assuming its billing will take place in early January): debit the...
was returned unpaid. Perhaps, the customer’s checking account balance was insufficient, perhaps a stop payment order prevented the check from being paid, or perhaps there was another reason. When the unpaid check...
account with the title Inventory Change or with the title (Increase) Decrease in Inventory. This account is presented as an adjustment to purchases in determining the company’s cost of goods sold. Example of Inventory...
for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The minimum number of accounts affected by every transaction is __________. 2. In a general journal entry,...
What is the difference between vertical analysis and horizontal analysis? Definition of Vertical Analysis Vertical analysis expresses each amount on a financial statement as a percentage of another amount. The vertical...
that it no longer uses in its business. The amount received by the company is more than the amount the asset is carried at in the accounting records. The company will report a(n) __________. Expense Wrong. Expenses are...
What is trading on equity? Definition of Trading on Equity Trading on equity, which is also referred to as financial leverage, occurs when a corporation uses bonds, other debt, and preferred stock to increase its...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Reconciling the bank statement is a procedure that can improve a company’s internal...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Normally, the Inventory account will report the goods on hand at the...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
the $18,000 expense and its balance sheet as of December 31 will report the $18,000 liability. After the financial statements are prepared, the closing entries will transfer the balance in the account Temp Service...
Why is income received in advance a liability? Definition of Income Received in Advance Under the accrual method of accounting, when a company receives money from a customer prior to earning it, the company will have to...
report that is/was useful in a manual accounting system. If the trial balance did not “balance” it signaled an error somewhere between the journal and the trial balance. Often the cause of the difference was a...
to a liability account a debit to an expense account if the employees are not involved in the manufacturing of products. (The FUTA tax for employees in the manufacturing departments is recorded in an account associated...
needs permit A drawback of common stock is that the common stockholders are last in line to receive money if a corporation is dissolved. Common Stock is also the title of the general ledger account that is credited when...
examples to show the usefulness of Herb’s tip. When a company receives the bank statement for its checking account, the bank statement already shows the deduction for the bank’s service charge. Therefore, the bank...
account that is used to record the interest incurred. Lastly, interest expense is usually a separate line on a company’s income statement that indicates the amount that occurred during the period appearing in the...
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...
to Cash of $10,150,000; a credit to Bonds Payable of $10,000,000; and a credit of $150,000 to Premium on Bonds Payable (an adjunct liability account). Over the life of the bonds, the $150,000 premium is to be accounted...
Expense and credit a liability account in the accounting period when the sales occur. When the commission payment is made, the liability account is debited and the Cash account is credited. If the sales are related to...
to the company’s Cash account. However, the debit portion of the payment entry depends on whether the individual credit card purchases had been previously recorded in the company’s general ledger accounts. Example...
bookkeeping or accounting system, another general ledger account will also be misstated by the same amount. Example of Understated Assume that a company reports its accounts payable as $210,000. Also assume that the...
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Sales minus the cost of good sold equals __________ __________. 2. The...
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...
Bookkeeping Video Training Part 13 Sales on credit: risk, unsecured accounts receivable, aging to monitor allowance for doubtful accounts, bad debts expense Must-Watch Video Learn How to Advance Your Accounting and...
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