quantity of direct material for its output, there will be no balance in the account Direct Materials Usage Variance. If the actual price per unit of direct materials is more than the standard cost per unit, the...
quantity of direct material for its output, there will be no balance in the account Direct Materials Usage Variance. If the actual price per unit of direct materials is more than the standard cost per unit, the...
as prepaid expenses. As the prepaid amount expires, the balance in Prepaid Insurance is reduced by a credit to Prepaid Insurance and a debit to Insurance Expense. This is done with an adjusting entry at the end of each...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
What is a trial balance? Definition of a Trial Balance A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization’s general ledger accounts. (Often the accounts with zero...
. On January 31, the date the machine is sold, the company must record January’s depreciation. This entry debits $400 to Depreciation Expense and credits $400 to Accumulated Depreciation. Also on January 31, the...
balance show that the accounts having debit balances = the accounts having credit balances. Example of Balance Sheet Totals Assets normally have debit balances. However, there are a few asset accounts that are expected...
What is a contra expense account? Definition of Contra Expense Account A contra expense account is a general ledger expense account that will intentionally have a credit balance (instead of the debit balance that is...
rate is 5.1% and there was no accrued interest. As a result, the investors paid $99.5 million for the bonds. The corporation also incurred $1 million of bond issue costs which were paid from bonds’ proceeds. The entry...
, a corporation could instead debit a related account entitled Dividends (or Cash Dividends Declared). However, at the end of the accounting year, the balance in the Dividends account will be closed by transferring its...
, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
a bank receives from a depositor. Since the bank is not earning this money, the amount is recorded by the bank with a debit to Cash and a credit to Customer Deposits. Example of Customer Deposit Let’s assume that Ace...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
Why is income received in advance a liability? Definition of Income Received in Advance Under the accrual method of accounting, when a company receives money from a customer prior to earning it, the company will have to...
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...
The sole proprietorship of J. Lee will include the following capital accounts: J. Lee, Capital, which is increased by J. Lee’s investment into the business plus each accounting period’s net income, and which is...
customers. The contract requires the customer to pay TOPCO $5,000 when the contract is signed and the remainder of $20,000 to be paid when TOPCO delivers the machine within 30 days of the signing. When TOPCO receives...
) amount of retained earnings is reported as a separate line within stockholders’ equity. The owner’s drawing account in a sole proprietorship will have a debit balance. Hence, if it is reported as a separate line,...
in the general ledger account Petty Cash. Example of Replenishing Petty Cash Let’s assume that a company has a petty cash fund of $100 and its general ledger account Petty Cash has a debit balance of $100. Mary is the...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
to pay at a later date, the company records the sale with a debit to Accounts Receivable and a credit to the revenue account Sales. The Sales account is a temporary account used to keep a tally of the sales made during...
are required by the __________ principle. 6. The adjusting entry for depreciation will include a debit to Depreciation Expense and a credit to __________ __________. 7. Adjusting entries help to convert accounting...
by bookkeepers to indicate the right side of an account is __________. 9. Recording a debit and credit amount for every transaction is referred to as __________-entry bookkeeping or accounting. 10. The normal balance...
The abbreviation for the accounting and bookkeeping term debit.
, both the company’s balance sheet and its income statement will not report the correct amounts. Adjusting entries are usually dated as of the final day of the accounting period. As is the case with all journal...
, but the adjusted account balances will be reported on the financial statements. The adjusted trial balance (as well as the unadjusted trial balance) must have the total amount of the debit balances equal to the total...
is as follows: Debit to Other Receivables-Advances to Employees for $800 Credit to Cash for $800 When the company earns interest on an employee loan or advance, the company should credit the amount earned to Interest...
balances). However, the debit balance amounts are entered in one column and the credit balance amounts are entered in another column. Each column is then summed to prove that the total of the debit balances is equal to...
in the property’s cost of $1,600,000. A real estate appraisal indicates that the land has a current value of $400,000 and the warehouse building has a current value of $1,200,000. The transaction will be recorded with...
, the seller will debit Accounts Receivable and will credit Sales. When the seller receives payment from the customer, the seller will debit Cash and will credit Accounts Receivable. Example of a Credit Sale Assume that...
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account....
How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) the...
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...
, etc. Recording a Bill Payable Under the accrual method of accounting or bookkeeping, a bill payable or unpaid vendor invoice is recorded in Accounts Payable with a credit entry. (The debit will likely be recorded as an...
certificate for merchandise or services. Accounting for the Sale of Gift Certificates The sale of a gift certificate should be recorded with a debit to Cash and a credit to a liability account such as Gift Certificates...
of an interest payment of $500 and a principal payment of $1,500. The company’s entry to record the loan payment will be: Debit of $500 to Interest Expense Debit of $1,500 to Loans Payable Credit of $2,000 to Cash The...
of a Sale on Credit Assume that a company is in an industry where it is necessary to give customers invoice payment terms of net 30 days. If the company sells $10,000 of goods to a customer with those terms, the company...
but is unpaid should be recorded with a debit to Interest Expense and a credit to the current liability Interest Payable. Example of Recording Unpaid Interest Let’s assume that on December 10, a company made its...
by the utility after six months of timely payments. The new business will record the deposit with a $500 debit to the current asset account Utilities Deposits and will credit the asset account Cash for $500. The...
in the fire is in the company’s general ledger accounts at a cost of $106,000. The insurance policy deductible was $1,000 per occurrence. The journal entry for this transaction is: Debit Cash for $105,000 Credit...
. The entry will debit Loan to Employee for $5,000 and will credit Cash for $5,000. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by debiting Interest...
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