and the buyer will have a purchase of goods and an account payable. Since the seller owns the goods while they are in transit, the seller is responsible for the goods and the cost of transporting the goods until they...
and the buyer will have a purchase of goods and an account payable. Since the seller owns the goods while they are in transit, the seller is responsible for the goods and the cost of transporting the goods until they...
, the account Sales is not involved. (The Sales account is used for recording sales of products in the company’s main business operations.) Example of a Sale of a Plant Asset Assume that Company XYZ wants to dispose 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...
What if a company's Allowance for Doubtful Accounts is understated? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account. The Allowance account’s credit...
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
, their balances are on the right side of the accounts similar to their position in the accounting equation: assets = liabilities + owner’s equity. The revenue accounts (which are temporary accounts) also have credit...
Which accounts normally have debit balances? Definition of Debit Balance In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by...
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...
This is a national organization of certified public accountants. For more information go to www.aicpa.org.
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...
generally have a 120 or 150 credit college degree including at least 30 credits of accounting courses plus 30 credits of other business courses. A bookkeeper is likely to be employed at a smaller company or organization...
. accounts receivable This current asset represents a right to receive payment from customers who were provided goods or services on credit. Mark as wrong Mark as right sales on credit (or) sales on account These...
the average. Therefore, if you have access to the company’s details, you should review a detailed aging of accounts receivable to discover any past due accounts. Join PRO to Track Progress Mark the Question as Read...
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...
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...
What is the purpose of depreciation? Purpose of Depreciation The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
and will be part of the expense known as the cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
the cost over the useful life. However, if the amount of the addition or the improvement is relatively small, the accounting concept of materiality allows you to expense the entire amount immediately. Join PRO to Track...
with significant amounts of inventory and plant assets. For example, when inventory is measured by using the first-in, first-out cost flow assumption under US GAAP, the actual historical cost of inventory that is...
, then the excess of current cost over LIFO cost is also disclosed. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
consider a project, its internal rate of return must equal or exceed the hurdle rate. The hurdle rate is also used to discount a project’s future cash flows to its net present value. Example of Hurdle Rate The...
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...
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
statement as the cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
for use as the site for the new office building, the entire $160,000 should be recorded in the Land account. 2. On July 1 of the current year, Jelco began using new equipment in its warehouse. The equipment had a cost...
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...
What does it mean to check the extensions and to foot an invoice? To check the extensions on a purchase invoice means to verify that the number of units of each item multiplied by its unit cost agrees with the total...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
to depreciation expense over the life of the machine, the impact on the company’s profit may be relatively small in the first accounting year compared to the cost of the machine. Example of New Machine’s Effect on...
What is the difference between a budget and a standard? Definition of a Budget In business and other organizations, a budget often refers to a department’s or a company’s projected revenues, costs, or expenses....
a profit for the company’s owners. If a company never has inventory at the end of the accounting periods, the allocation of manufacturing overhead could be avoided. The reason is that all of the manufacturing costs...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
of an income statement that reports expenses in excess of revenues. The FASB’s Statement of Financial Accounting Concepts No. 6 (December 1985) discusses expenses and losses in paragraphs 80-89. You can access this...
account Land is $580,000. Therefore, the corporation’s balance sheet will report its four acres of land at a cost of $580,000. There is no adjustment for the difference in purchasing power between the 2004 dollar and...
as the asset Propane Inventory. As the propane is sold, the dealer will reduce Propane Inventory for the cost of the propane sold and will increase the expense Cost of Goods Sold. Example 3. A manufacturer uses propane...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
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