or the owner’s capital account at the end of each accounting year.) Contra-liability accounts such as Discount on Bonds Payable or Unamortized Bond Issue Costs. (These debit balances allow for the presentation of both...
or the owner’s capital account at the end of each accounting year.) Contra-liability accounts such as Discount on Bonds Payable or Unamortized Bond Issue Costs. (These debit balances allow for the presentation of both...
accounts: Liability accounts such as Accounts Payable, Notes Payable, Wages Payable, Interest Payable, Income Taxes Payable, Customer Deposits, Deferred Income Taxes, etc. Hence, a credit balance in Accounts Payable...
account. It comes about when a company has received cash in advance of earning it. As a result the company has the cash, but also has the obligation/liability to perform the service, deliver the product, or return...
Bond Issue Costs is a contra liability accounts reported along with Bonds Payable. Bond Issue Costs include the professional fees and registration fees associated with the issuance of bonds. The amount in the account...
account. Since debit means left side, an asset account will normally have a debit balance. Liability accounts, which appear on the right side of the accounting equation, will usually have their balances on the right...
for Doubtful Accounts is a contra account to __________ __________. 4. Inventory is often reported at the lower of __________ or net __________ value. 5. The cost of insurance premiums that have been paid but have not...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
The amount a company owes for expenses or losses incurred that have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting Entries.
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
A business organization different from a sole proprietorship, partnership, and corporation. As the name implies it provides the limited liability protection usually associated with a corporation. To learn more about this...
See payroll taxes payable.
See vacation pay payable.
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
What is a contingent liability? Definition of Contingent Liability A contingent liability is a potential liability that may or may not become an actual liability. Whether the contingent liability becomes an actual...
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
See current liabilities.
Usually a current liability that reports the amount of rent that the tenant has incurred but has not paid as of the date of the balance sheet.
of an account. When an account balance is on the right side of an account, we say the account has a credit balance. A credit entry in an asset account will reduce the account’s usual debit balance. A credit entry in...
and is consistent with the accounting equation ( Assets = Liabilities + Owner’s Equity) where the asset account balances are on the left side. However, there are a few general ledger asset accounts that must have...
or the owner’s capital account, an expense will also cause one or more of the following changes to the balance sheet: A decrease in Cash, Prepaid Expenses, Supplies on Hand, Inventory An increase in the credit balance...
by the corporation, the stockholders’ equity account Retained Earnings would be credited. If a corporation reduces its assets by purchasing its stock from its stockholders, the contra-stockholders’ equity account...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
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...
) is considered to be a contra account. In addition, the drawing account is a temporary account since its balance is closed to the capital account at the end of each accounting year. Example of the Drawing Account...
that has been recorded since a plant asset was put into service. accumulated depreciation This contra asset account reports the amount of depreciation that has been recorded since a plant asset was put into service....
Unscramble 4. The type of account involved with the deferral of revenues. LIABILITY IBLLIITAY Unscramble LIABILITY AIBTLIILY Unscramble 5. This type of account is part of the entry to accrue revenues. ASSET ETASS...
The contra asset account which accumulates the amount of Depreciation Expense taken on Equipment since the equipment was acquired. As a contra asset account it will have a credit balance.
Are utility bills an expense or a liability? Definition of Utility Bills Utility bills are invoices received by a company for the natural gas, electricity, water, and sewer charges that the company used during a previous...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
an agent of the state and will record the sales taxes collected in a current liability account such as Sales Taxes Payable. When the merchant remits the sales taxes to the state, the current liability account is...
On credit; not for cash.
A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
What is a valuation account? Definition of Valuation Account In accounting, a valuation account is usually a balance sheet account that is used in combination with another balance sheet account in order to report the...
balances. Example of Using the Dividends Account Assume a corporation declares a cash dividend of $50,000 on its common stock. On the date the dividend is declared, the corporation will credit the current liability...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
Is the provision for doubtful debts an operating expense? Definition of Provision for Doubtful Debts Some companies use Provision for Doubtful Debts as the name of the contra-asset account which is reported on the...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
The contra owner’s equity account used to record the current year’s withdrawals of business assets by the sole proprietor for personal use. This is a temporary account with a debit balance. It will be closed...
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