Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
amount.) Example of Purchase Discounts Lost Assume that a retailer’s policy is to always pay a vendor’s legitimate invoice within the early payment discount period if such a discount is offered. Also assume that the...
, an invoice of $1,000 with terms of 1/10, net 30 means that the $1,000 obligation will be settled in full for $990 if it is paid within 10 days. If the customer has adequate cash or a readily available line of...
Transfer of an asset’s title from seller to buyer for a stated amount. The transfer/sale occurs at the shipping point (if terms are FOB shipping point), at the time when the item reaches the destination (if terms...
marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
since the goods are not physically present at either the seller’s or the buyer’s location. It is necessary to examine whether the sales terms were FOB shipping point or FOB destination. The rules to be followed are:...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
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...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
Why are revenues credited? Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of...
This is the left side of an account and also the normal balance for asset, expense, and loss accounts. Mark as wrong Mark as right credit (or) credit balance This is the right side of an account and also the normal...
Our visual tutorial for the topic Debits and Credits contains valuable tips for gaining a more complete understanding of when to debit and/or credit accounts. Many sample transactions are presented and each will...
When are expenses credited? Definition of Expenses Credited Normally, the general ledger accounts for expenses are debited and are expected to have debit balances. The reason they are debited is they cause the normal...
are decreased with a ________. DEBIT EBITD Unscramble DEBIT ITBED Unscramble 2. A credit will increase the balance in a _________ account. REVENUE NEREVEU Unscramble REVENUE EUVEENR Unscramble 3. Credits are entered on...
more, see Explanation of Inventory and Cost of Goods Sold. A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that...
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
Terms indicating that the buyer must pay to get the goods delivered. (The buyer will record freight-in and the seller will not have any delivery expense.) With terms of FOB shipping point the title to the goods usually...
our Accounts Payable (Explanation). 1. The general ledger account Accounts Payable is a current __________ liability account. 2. A __________ balance is typical for Accounts Payable. Debit Wrong. Credit Right! 3. The...
Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit? Definition of Contributed Capital Contributed capital is one of the major components of a corporation’s stockholders’ 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...
Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
Why is Rent Expense a debit and Service Revenues a credit? Why Rent Expense is a Debit Rent expense (and any other expense) will reduce a company’s owner’s equity (or stockholders’ equity). Owner’s equity which...
Why will some asset accounts have a credit balance? Definition of Asset Account Balances In accounting, asset accounts normally have debit balances. That is, the general ledger accounts for assets typically have their...
Which date is used to record a credit card transaction? When a business uses its credit card, the transaction date is the date the credit card is used, not the date that the credit card statement is paid. For example, if...
Why does a company's profit appear as a credit on its balance sheet? The accounting equation and the double entry system provide an explanation why a company’s profit appears as a credit on its balance sheet....
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
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...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Recording each transaction with a minimum of one debit and one credit is known as __________...
. For example, assets are increased with a debit entry but expenses are also increased with a debit entry. 2. Which of the following should be associated with the term credit? Select... Bad or unfavorable Good or...
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 a contra-asset account. 6. Sales and services that are provided on credit will cause an increase in the asset account __________ __________. 7. Accounts Payable, Wages Payable, and Notes Payable are examples of...
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...
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...
debit balances, while the liability and owner’s equity accounts are expected to have credit balances. Therefore, when a company earns revenues, it will debit an asset account (such as Accounts Receivable) and will...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. An entry on the right side of a T-account. Select... Debit Credit 2. This will increase the...
website for $70,000. The terms require a payment of $30,000 at the time the contract is signed and $40,000 at the end of the project, which is estimated to take 60 days. The company agrees to begin working on the...
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