A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
A current asset that reports the amount paid for dues that have not yet expired. As the prepaid dues expire, the account Prepaid Dues is reduced and dues expense is increased.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
A long-term asset account reported on the balance sheet under the heading of property, plant, and equipment. Included in this account would be copiers, computers, printers, fax machines, etc.
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
An asset account in a bank’s general ledger that indicates the amounts owed by borrowers to the bank as of a given date.
The borrower who provides to a lender an asset as collateral for a loan.
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
Asset, liability, and owner’s equity accounts. Also referred to as permanent or real accounts. To learn more, see Explanation of Balance Sheet.
A current asset account which contains the amount of investments that can and will be sold in the near future.
The party owning an asset and receiving rent from another party (the lessee).
Amount of depletion charged to expense on the income statement for the period indicated in its heading. The amount is also credited to the contra asset account Accumulated Depletion.
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
Also referred to as real accounts. Accounts that do not close at the end of the accounting year. The permanent accounts are all of the balance sheet accounts (asset accounts, liability accounts, owner’s equity...
A current asset account that reports the amount of future rent expense that was paid in advance of the rental period. The amount reported on the balance sheet is the amount that has not yet been used or expired as of the...
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. (Restricted cash should be recorded in a different account.)
Additions or changes to a rented building that are made by the tenant rather than by the landlord. The tenant will record the cost of these changes in the long term asset account Leasehold Improvements. The cost of these...
Usually a permanently restricted asset for which the principal portion must be retained indefinitely. The earnings from an endowment fund could be unrestricted or temporarily restricted.
that on December 31, a company paid $12,000 for a maintenance agreement covering the next 12 months. The transaction was recorded on December 31 with a debit of $12,000 to the current asset Prepaid Expense and a credit...
accounts, which consists of asset, liability, and owner’s (stockholders’) equity accounts Income statement accounts, which consist of revenue, expense, gain, and loss accounts Examples of Accounts Affected by...
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
for that account classification. For example, Accumulated Depreciation is a contra asset account that is associated with asset accounts for buildings, equipment, vehicles, etc. The asset accounts have debit balances,...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
them to the goods produced. (This is not acceptable for external reporting by U.S. companies.) Mark as wrong Mark as right fixed overhead costs These indirect manufacturing costs do not change in total within a relevant...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
Elements of Financial Statements (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. 1. Probable future economic benefits is part of the definition of __________. ASSETS...
December income statement as Insurance Expense of $400. The remaining $2,000 of unexpired insurance (5 months X $400) must be reported on the December 31 balance sheet as a current asset such as Prepaid Insurance or...
Bookkeeping Video Training Part 13 Sales on credit: risk, unsecured accounts receivable, aging to monitor allowance for doubtful accounts, bad debts expense Must-Watch Video Learn How to Advance Your Accounting and...
to report 1) revenue and expense amounts for a distinct time period such as a month, quarter, etc., and 2) asset and liability amounts as of the final moment of the accounting period. Monetary Unit Assumption The...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
Accounts that have some restrictions. For example, an investment account and a cash account might be restricted for the construction of a new factory. The restrictions mean that these accounts be reported as a long-term...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
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