Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
their account balances on the right side or credit side. Example of Why Revenues are Credited To illustrate why revenues are credited, let’s assume that a company receives $900 at the time that it provides a service...
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
This is a long term asset account that accumulates the cost of a project that has not yet been placed into service. When the project is finished and placed into the service, the cost is removed from this account and is...
What is the interest coverage ratio? Definition of Interest Coverage Ratio The interest coverage ratio is a financial ratio used as an indicator of a company’s ability to pay the interest on its debt. (The required...
. Here are some transactions that will affect only the right side of the accounting equation. 1) A company refinances its short-term debt with long-term debt. Short-term liabilities will decrease and long-term...
on specified future dates Reported as liabilities Interest is accrued as a current liability Principal that is due within one year of the balance sheet date is reported as a current liability (unless there is a bond...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
What are bonds payable? Definition of Bonds Payable Bonds payable are a form of long term debt usually issued by corporations, hospitals, and governments. The issuer of bonds makes a formal promise/agreement to...
in Allowance for Doubtful Accounts reduces the amount reported on a company’s balance sheet for accounts receivable to the amount that is expected to be collected. The balance sheet account Allowance for Doubtful...
Is the provision for doubtful debts an operating expense? Definition of Provision for Doubtful Debts Some companies use Provision for Doubtful Debts as the name of the contra-asset account which is reported on the...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
be prepared at the same time and will result in a debit to Accounts Receivable and a credit to Sales. If a company provides services on account, it will debit Accounts Receivable and will credit Service Revenues (or...
Accounts Receivable and Bad Debts Expense For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space...
Accounts Receivable and Bad Debts Expense (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (27) Marked Wrong (0) Marked Right (0) accounts receivable This current asset represents a right to...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
What does 2/10 mean in accounting? Definition of 2/10 2/10 is part of an early payment discount that allows a customer or client to pay after the sale or service has been provided. This sales discount...
-in-Progress. Construction Work-in-Progress is often reported as the last line within the balance sheet classification Property, Plant and Equipment. There is no depreciation of the accumulated costs until the project is...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
restrictions. With Wrong. Without Right! 16. Contributions received from donors are reported on the statement of activities under the caption __________ revenues. 17. The Internal Revenue Service Form __________ 990...
as an annual amount per unit or as a percentage of an item’s cost. The calculation of the cost to store inventory should be the incremental annual costs or the company’s opportunity costs. In other words, if a...
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...
Prepaid Expense for $1,000. Example of Deferral Adjusting Entry for Revenues On December 31, a maintenance service company received $12,000 and agreed to provide the client with maintenance on its equipment for the next...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
and will be reported on the balance sheet as part of a company’s noncurrent or long-term asset section entitled Property, plant and equipment. The costs of constructing the asset are accumulated in the account...
examples to show the usefulness of Herb’s tip. When a company receives the bank statement for its checking account, the bank statement already shows the deduction for the bank’s service charge. Therefore, the bank...
on the company’s balance sheet is an increase in current assets and an increase in owner’s or stockholders’ equity. The company’s income statement will also report the amount of the revenues earned. Example of...
See Internal Revenue Service (IRS).
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...
in the company’s general ledger accounts. Examples of Journal Entries for Bank Reconciliation Examples of items requiring a journal entry as the result of the bank reconciliation include: Bank service charges which...
not been recorded in the company’s general ledger accounts. Examples of Journal Entries in a Bank Reconciliation Common adjustments to the balance per books include: Bank fees or service charges for maintaining the...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Featured Review
"My current position is as a business broker. I became a PRO user of AccountingCoach because I wanted to learn bookkeeping as a side job during the pandemic. The site is laid out in a very logical way, and it's very easy to follow. I love that there are tests along the way to check your knowledge. I first enrolled in AccountingCoach during the depths of the pandemic. I was stuck in a foreign country and couldn't return to the US, so I started to look for skills I could use to build an income. I chose bookkeeping and stumbled upon AccountingCoach. In a matter of weeks, I went from knowing nothing, to freelancing for clients. Later, I started a business and was able to handle all of my own books thanks to what I learned from AccountingCoach. After selling that business, I started helping others buy and sell their businesses as a business broker. Reading and understanding financial statements is an essential skill in this line of work. It is not a stretch to say that AccountingCoach is the highest ROI investment into my education that I have ever made!" - Ross Z.
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: