What causes a reduction in Accumulated Depreciation? Definition of Accumulated Depreciation Accumulated Depreciation is a general ledger contra asset account associated with a company’s property, plant and equipment....
What causes a reduction in Accumulated Depreciation? Definition of Accumulated Depreciation Accumulated Depreciation is a general ledger contra asset account associated with a company’s property, plant and equipment....
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
of the voucher used in accounts payable as a cover sheet to which necessary supporting documents and approvals are attached. Some of the supporting documents include: The vendor’s invoice The company’s purchase...
What is the difference between a differential cost and an incremental cost? Definition of Differential Cost and Incremental Cost I use the terms differential cost and incremental cost to mean the same thing: the...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
expense. The term gross profit means sales minus the cost of goods sold. Knowing that people might use terms differently, you may need to ask the person a question to clarify their intended meaning. Join PRO to Track...
What is the difference between accounts payable and accounts receivable? Definition of Accounts Payable Accounts payable is a current liability account in which a company records the amounts it owes to suppliers or...
, it debits Cash. Every transaction will require a debit to at least one account and a credit to at least one other account. Here are two examples to illustrate our five tips. A bakery records its cash sales at a local...
A journal entry with more than the minimum of one debit and one credit. Example: a debit to Cash of $500 and a credit to Sales of $475 and a credit to Sales Tax Payable of $25.
What is a contra revenue account? Definition of Contra Revenue Account A contra revenue account is a revenue account that is expected to have a debit balance (instead of the usual credit balance). In other words, its...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
had a flaw. When the retailer notified the supplier, the supplier requested that the retailer donate or discard the item and the supplier will issue a credit memo for $15. Under a periodic inventory system, the retailer...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
What is a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
What is a bill payable? Definition of Bill Payable A bill payable is a document which shows the amount owed for goods or services received on credit (meaning not paid at the time that the goods or services were...
debit card, the bank’s liability account such as Customer Checking Accounts or Demand Deposits will be reduced. To reduce the normal credit balance in the bank’s liability account, a debit entry is required. The...
How do you estimate the amount of uncollectible accounts receivable? Definition of Estimating Uncollectible Accounts Receivable When a company sells goods and/or provides services on account (on credit) using the...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Right! Accumulated Depreciation is a contra asset account. It is located in the long-term asset section of the balance sheet under the heading of property, plant, and equipment. Mary Smith, Capital Wrong. Mary Smith,...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
What is the average collection period? Definition of Average Collection Period The average collection period is the average number of days between 1) the dates that credit sales were made, and 2) the dates that the money...
entered as a debit and at least one account will have an amount entered as a credit. Further, the total amounts entered as debits must be equal to the total amounts entered as credits. Meeting these requirements will...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
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...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
of the page. 1. ABC Co.’s bank statement indicates that its checking account was credited when one of ABC’s customers transferred $500 into ABC’s checking account. How will this be recorded by ABC Co. in its...
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...
What is accounts receivable? Definition of Accounts Receivable Accounts receivable is the amount owed to a company resulting from the company providing goods and/or services on credit. The term trade receivable is...
a debit entered on the left side of a general ledger account. (There will also need to be a credit amount entered on the right side of another account.) The abbreviation for debit is dr. (which is also related to the...
proprietorship). Example of Income Summary Account In a manual accounting system, the closing entries will result in the following amounts in Income Summary: A credit amount for the total amount of the general ledger...
What is the purpose of the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts or Allowance for Uncollectible Accounts is a general ledger contra account...
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
The debit or credit balance that would be expected in a specific account in the general ledger. For example, asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and...
Someone who has granted credit. If a bank lends a company money, the bank is a creditor. If a supplier sold merchandise to a company on credit, the supplier is a creditor.
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
A stockholders’ equity account with a credit balance. The credit balance results when a corporation sells some of its treasury stock for an amount that exceeds the corporation’s cost of the treasury stock...
Why are assets and expenses increased with a debit? Definition of Debit In accounting the term debit indicates the left side of a general ledger account or the left side of a T-account. (The right side of an account or a...
the direct write-off method or the allowance method. Examples of the Write-off of a Bad Account Under the direct write-off method a company writes off a bad account receivable when a specific account is determined to be...
interest rate. The corporation will record the transaction with a credit to the liability account Bonds Payable for $2,000,000, a credit to the related adjunct liability account Premium on Bonds Payable for $100,000,...
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