An expense that has occurred but the transaction has not been entered in the accounting records. Accordingly an adjusting entry is made to debit the appropriate expense account and to credit a liability account such as...
An expense that has occurred but the transaction has not been entered in the accounting records. Accordingly an adjusting entry is made to debit the appropriate expense account and to credit a liability account such as...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
A long-term asset which indicates the cost of the constructed improvements to land, such as driveways, walkways, lighting, and parking lots. Land Improvements will be depreciated over their useful life by debiting the...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
A term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
liability. When a company receives money in advance of earning it, the accounting entry is a debit to the asset Cash for the amount received and a credit to the liability account such as Customer Advances or Unearned...
Where is the discount on the purchase of office furniture recorded? Definition of Discount on Purchase of Office Furniture The discount on the purchase of office furniture that will be used by a company (as opposed to...
. If the employee is paying (reimbursing) the company immediately, you can record the entire phone bill with a debit of $100 to the company’s account Telephone Expense. You will also credit Telephone Expense for $20...
usually had an option to print the liability account balances on the balance sheet without the negative signs. If only one liability account has a negative sign, it is likely that the liability account has a debit...
certificate for merchandise or services. Accounting for the Sale of Gift Certificates The sale of a gift certificate should be recorded with a debit to Cash and a credit to a liability account such as Gift Certificates...
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...
Advertising Expense. The accounts for revenues are almost always credited. When a bakery sells its products, it credits Sales. When a bank earns interest on its loans, it credits Loan Interest Revenues. When a company...
What is an adjusted trial balance? Definition of an Adjusted Trial Balance The adjusted trial balance is an internal document that lists the general ledger account titles and their balances after any adjustments have...
What does overstated mean? Definition of Overstated When an accountant uses the term overstated, it means two things: The reported amount is incorrect, and The reported amount is more than the true or correct amount. In...
What is the difference between accounts payable and accrued expenses payable? Definition of Accounts Payable Accounts Payable is a liability account in which suppliers’ or vendors’ approved invoices are recorded. As...
in a logical manner for the following reasons: the portion of the lump sum cost that is recorded in the Land account will not be depreciated the portion of the lump sum cost that is recorded in the Buildings account...
of direct labor hours or production __________ hours. 5. Under a perpetual accounting system, when a job is completed its cost is credited to the account work-in-process and is debited to the account with the title...
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...
statement account Repairs Expense for $6,000, and credits the balance sheet current liability account Accrued Expenses Payable for $6,000. Examples of other expenses that typically require an accrual adjusting entry...
to the company with the words “Account Closed”. The entry to record the returned check should include a __________ to Accounts Receivable. Select... credit debit 6. Pledged accounts receivables are receivables that...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
of the account balances. After the heading you will likely see the following column headings: account number, account title, debit balance amount, and credit balance amount. Next will be a listing of all of the general...
as the borrower or debtor and records the amount owed in a liability account such as Notes Payable. The person or organization that has the right to receive the money when the promissory note comes due is known as the...
the appraisal amounts as a logical way to divide up the cost of $220,000 between land and building. Here is one approach: Assign or allocate $44,000 to the account Land. This is 20% of the $220,000 cost. Assign or...
Why does a company debit Purchases instead of Inventory? Definition of Purchases and Inventory When a company uses the periodic inventory system the amount of the company’s inventory is determined by a physical count...
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...
from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
When do you adjust the amount of prepaid expenses? Definition of Adjusting Prepaid Expenses The balance in the current asset account Prepaid Expenses should be adjusted prior to a company issuing its financial...
. An entry in the general journal will include the date, the account with the amount that is to be debited, the account with the amount that is to be credited, and a brief description. After these relatively few...
coverage from December 1 through May 31. Examples of Two Methods for Recording Prepaid Expenses One method for recording a prepaid expense is to record the entire payment in an asset account. For example, assume that on...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
four months earlier and the check has not yet cleared the company’s bank account. Example of Writing Off an Old Outstanding Check On January 22, a company issued a check for $124 for a business expense. As of June 30,...
What is not sufficient funds? Definition of Not Sufficient Funds Not sufficient funds or NSF or insufficient funds is a term to describe a check that has been returned by the bank because the balance in the checking...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
What is a bank reconciliation? What is a Bank Reconciliation A bank reconciliation is a process performed by a company to ensure that its records (check register, general ledger account, balance sheet, etc.) are correct....
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