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 a sale was made on account and was not a cash sale. To learn more...
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 a sale was made on account and was not a cash sale. To learn more...
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,...
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
, and stockholders’ equity accounts. Credit entries will also decrease the debit balances usually found in asset and expense accounts. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
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...
Under the accrual basis of accounting the account Supplies Expense reports the amount of supplies that were used during the time interval indicated in the heading of the income statement. Supplies that are on hand...
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...
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...
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...
as the __________ __________ __________ sold. 20. The annual cost of goods sold divided by the average inventory during the year is the formula for the inventory __________ ratio. Any questions left unanswered will be...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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...
expenses (cost of a new delivery van), and some costs become expenses immediately (airing a television advertisement). Examples of Costs and Expenses Assume that a company purchases 2,000 units of a supply item each of...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
will begin each accounting year with a zero balance and will have its balance at the end of the year closed to an equity account such as a corporation’s retained earnings or a proprietor’s capital account....
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
, there is no contra asset account such as Allowance for Doubtful Accounts. Therefore the entire balance in Accounts Receivable will be reported as a current asset on the company’s balance sheet. As a result, the...
What is a bond sinking fund? Definition of Bond Sinking Fund A bond sinking fund is a corporation’s noncurrent asset that is restricted for the purpose of redeeming or buying back its bonds payable. Bonds that require...
: Less profit Less asset amount Greater liability amount The conservatism guideline does not direct the accountant to be super conservative and beat down a company’s profits. The accountant is to be fair and objective....
of the property is known as the lessor and the person using the property is the lessee. Some leases are for short periods of time with no intention of transferring ownership of the asset in exchange for the rent...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
: It is a note payable for the borrower who reports the note on its balance sheet as a liability It is a note receivable for the lender who reports the note on its balance sheet as an asset The interest promised in the...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
Is depreciation an operating expense? Depreciation Could Be Either an Operating Expense or a Non-operating Expense Depreciation is an operating expense if the asset being depreciated is used in an organization’s main...
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...
, 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...
are FOB __________. 6. FIFO is an inventory __________ __________ assumption. 7. When a company uses FIFO, its inventory might be reported at the lower of __________ or __________ __________ __________. 8. The inventory...
is associated with Accounts Receivable and the Allowance for Doubtful Accounts. 3. Depreciation Expense is associated with the contra-asset account __________ Depreciation. 4. Insurance Expense is associated with the...
account’s balance appearing in the appropriate debit or credit column. At the bottom of the debit balance and credit balance columns will be a total for each. When accounting software is used, the totals should always...
What is yield to maturity? Definition of Yield to Maturity Yield to maturity is the total return that will be earned by someone who purchases a bond and holds it until its maturity date. The yield to maturity might also...
that will be cashed to get the cash in the petty cash fund back to the imprest general ledger amount of $100.) The debits will be the accounts and amounts shown on the petty cash receipts, which total $93. To get the...
employees’ wages to pay part of the cost of the insurance, the company will credit its contra expense account 4211 Employee Withholdings for Health Ins. The benefit of using the contra expense account is that the...
. At the end of the month the total of the column is debited to Accounts Receivable and credited to Sales. Throughout the month, the individual sales invoices will be posted to each customer’s record found in the...
) will not be reduced. The $400,000 of costs that are directly associated with E are relevant costs, since the company will see its total costs decrease by $400,000 when E is eliminated. Since the company’s other...
not address a project’s total profitability over its entire life, nor are the cash flows discounted for the time value of money. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
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