What is callable stock? Callable stock is an ownership interest (shares) in a corporation that can be “called in” by the corporation at a specified price. For example, a corporation might issue 9% $100 Preferred...
What is callable stock? Callable stock is an ownership interest (shares) in a corporation that can be “called in” by the corporation at a specified price. For example, a corporation might issue 9% $100 Preferred...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
How do you treat voided checks on the bank reconciliation? Definition of Voided Check on Bank Reconciliation If a check was voided in the current month but was written in the previous month and appeared on the previous...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
What is the payout ratio? The payout ratio indicates the percentage of a corporation’s earnings which are distributed as cash dividends to its stockholders. Typically, the payout ratio is computed by using the per...
What journal entries are prepared in a bank reconciliation? Definition of Journal Entries in a Bank Reconciliation Journal entries are required in a bank reconciliation when there are adjustments to the balance per...
What is the difference between public sector and private sector? Definition of Public Sector Public sector refers to: government-owned organizations, and government-provided services (Note: public sector entity is...
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
What is the procedure for preparing a trial balance? Definition of a Trial Balance A trial balance consists of the following information: The title of each general ledger account that has a balance To the right of the...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
What is the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a balance sheet contra asset account that reduces the reported amount of accounts...
What is a nonprofit organization? A nonprofit organization is an organization without commercial owners and which addresses the needs of society. Nonprofit organizations are also known as not-for-profits, NFP’s or...
What is the accounting entry to close the sole proprietorship drawing account? Definition of Sole Proprietorship Drawing Account The drawing or withdrawal account for a sole proprietorship is a temporary owner equity’s...
What is accrued income? Definition of Accrued Income Accrued income is an amount that: A company has earned The company has a right to receive The collection is probable Has not yet been recorded in the general ledger...
What is the difference between a deferred expense and a prepaid expense? Definition of Deferred Expense and Prepaid Expense Deferred expense and prepaid expense both refer to a payment that was made, but due to the...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
What is capital stock? Definition of Capital Stock Capital stock refers to the shares of ownership that have been issued by a corporation. The amount received by the corporation when its shares of capital stock were...
What is a transposition error? Definition of Transposition Error A transposition error occurs when an amount is recorded incorrectly as the result of switching the positions of two (or more) digits. The switching of the...
What does amortization mean? Definition of Amortization In general, the word amortization means to systematically reduce a balance over time. In accounting, amortization is conceptually similar to the depreciation of a...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real account....
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
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...
What is window dressing? Definition of Window Dressing Window dressing refers to actions taken or not taken prior to issuing financial statements in order to improve the appearance of the financial statements. Example...
What is accounting? Definition of Accounting Accounting is the recording of financial transactions along with storing, sorting, retrieving, summarizing, and presenting the results in various reports and analyses....
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
What is premium on bonds payable? Definition of Premium on Bonds Payable Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. This is...
Why are accruals needed every month? Reasons for Monthly Accruals Accrual adjusting entries are needed monthly only if a company issues monthly financial statements. Two reasons for the monthly accrual adjusting entries...
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
Are undeposited checks reported as cash? Undeposited checks that are not postdated (not dated with a future date) are reported as cash. Accountants define cash as more than just currency and coins. For example,...
What is the difference between par and no par value stock? Definition of Par Value Stock Some states’ laws require or may have required common stock issued by corporations residing in their states to have a par value....
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
How do you calculate the actual or real interest rate on a bond investment? Definition of Actual or Real Interest Rate on a Bond Investment The actual or real interest rate on a bond payable is also known as effective...
Where do dividends appear on the financial statements? Definition of Dividends Cash dividends are a distribution of a company’s profits. Financial Statements of a Corporation The main financial statements of a...
Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
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...
When do you put parentheses ( ) around a number? Definition of Amounts in Parentheses Parentheses around a number could have a variety of meanings. For example, parentheses could indicate any of the following: A negative...
What is the difference between residual value, salvage value, and scrap value? The terms residual value, salvage value, and scrap value are often used when referring to the estimated value that is expected at the end of...
What is the difference between an unadjusted trial balance and an adjusted trial balance? Difference between Unadjusted Trial Balance and Adjusted Trial Balance The differences between an unadjusted trial balance and an...
Featured Review
"I was interested in getting my finances under control. I was advised to track my expenses but I had no background in accounting. I wanted to do proper record keeping and not just of expenses, but my wealth. I came across many tutorials online. The most comprehensive tutorials were those of AccountingCoach. After being able to quickly learn, I decided to go PRO to have access to additional learning tools. I love the quizzes, they help me determine if I truly understand the material. After 1 year, I know enough about accounting to manage my finances and grow my wealth. Going PRO is one of the best investments I've made. Thank you AccountingCoach!" - Alex L.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: