What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
What are fixed assets? Definition of Fixed Assets Fixed assets are a company’s tangible, noncurrent assets that are used in its business operations. The word fixed indicates that these assets will not be used up,...
Will I be able to pass the CPA Exam after studying the accounting material on AccountingCoach.com? AccountingCoach.com contains introductory accounting material. While you need to master the principles and concepts...
What is an overdraft? Definition of Overdraft An overdraft (also known as a bank overdraft) generally means that the amount of a company’s checks being presented at the bank for payment exceeded the amount on deposit....
What is a BOM? Definition of BOM BOM is the acronym for bill of materials. A BOM is a listing of the quantities of each of the materials used to manufacture a product. Industrial manufacturers are likely to have an...
What is the entry for a loan to an employee? Definition of Loan to Employee A loan to an employee is money advanced by the company to assist the employee. If the employee is expected to repay the loan within one year of...
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...
What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
What is contained on a 10-column worksheet? The 10-column worksheet that I am familiar with will have the general ledger account titles in the first column followed by ten columns of amounts. There will be one debit and...
What is theoretical capacity? Theoretical capacity is the level of a manufacturer’s production that would be attained if all of its equipment and operations performed continuously at their optimum efficiency....
How do you calculate the payback period? Definition of Payback Period The payback period is the expected number of years it will take for a company to recoup the cash it invested in a project. Examples of Payback Periods...
What is the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
What is the difference between information and data? I was taught that information is useful data. The point is there are lots of data (plural of datum) everywhere, and most of the data will not be useful to a decision...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
What is accrued interest? Definition of Accrued Interest Accrued interest is the amount of loan interest that has already occurred, but has not yet been paid by the borrower and not yet received by the lender. Under the...
What is an impairment? Definition of Impairment The term impairment is associated with an asset currently having a market value that is less than the asset’s book value . A test is done to determine whether the...
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...
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
What is value billing? Value billing is a way of billing a client for services provided. Basically, the amount billed is based on the value of the service (or information) instead of the number of hours spent. The...
amount) discounted by the market interest rate at the time of the bond sale. Example of a Bond Premium A person would buy a bond at a premium (pay more than its maturity value) because the bond’s stated interest rate...
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 a creditor? Definition of Creditor A creditor could be a bank, supplier or person that has provided money, goods, or services to a company and expects to be paid at a later date. In other words, the company owes...
What is equity? Definitions and Examples of Equity Equity has several definitions that pertain to accounting: Equity can indicate an ownership interest in a business, such as stockholders’ equity or owner’s equity....
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 a source document? Definition of Source Document A source document is an original record which contains the detail that supports or substantiates a transaction that will be (or has been) entered in an accounting...
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 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...
What is an annuity in present value calculations? In present value calculations, an annuity is a series of equal cash amounts occurring at equal time intervals. The identical cash amounts are sometimes referred to as...
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...
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
Where should a business report cash which is restricted to purchase a long-term asset? The cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under the asset...
What is a contingent asset? Definition of Contingent Asset A contingent asset is a potential asset that is associated with a potential gain. The asset and gain are contingent because they are dependent upon some future...
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 the difference between an invoice and a voucher? Definition of an Invoice An invoice received from a vendor is a billing for goods or services that it had provided. The vendor’s invoice will include the...
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...
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 actual overhead and applied overhead? Definition of Actual Overhead In the context of actual and applied overhead, actual overhead refers to a manufacturer’s indirect manufacturing costs....
What are reversing entries and why are they used? Definition of Reversing Entries Reversing entries are made on the first day of an accounting period to remove accrual adjusting entries that were made at the end of the...
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...
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