What is the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
What is the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
What is the accounting entry to close the sole proprietorship drawing account? Definition of Sole Proprietorship Drawing Account The drawing or withdrawal account for a sole proprietorship is a temporary owner equity’s...
What is the difference between a note payable and a bond payable? Definition of Note Payable and Bond Payable For accounting purposes, a note payable and a bond payable have the following similarities: Formal written...
What is the meaning of a favorable budget variance? Definition of a Favorable Budget Variance A favorable budget variance means that the actual amount that occurred was better for the company (or organization) than the...
What is double-entry bookkeeping? Definition of Double-Entry Bookkeeping Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least...
What are the typical items reported as current liabilities? Definition of Current Liabilities Current liabilities (also known as short-term liabilities) for most companies are the obligations that must be paid within one...
Is it possible to have a balance sheet for a single day? A balance sheet presents the amounts of a company’s assets, liabilities, and owner’s equity as of an instant or moment in time within a day. Usually it is the...
What is the difference between inventory and the cost of goods sold? Definition of Inventory Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. A...
What is the difference between income and profit? Definition of Income The term income is used differently by many people. For some, income means the money coming in, such as What is your family income? What is your...
Why is manufacturing overhead allocated to products? Definition of Manufacturing Overhead Allocated to Products Manufacturing overhead refers to the indirect production costs of producing goods, products, component...
What is the net method? Definition of Net Method In accounting, the net method likely refers to the way a company records each vendor’s invoice that offers an early payment discount. Example of Net Method Assume that a...
How do I write off old outstanding checks? Definition of an Old Outstanding Check We will assume that an outstanding check has appeared on the outstanding check list that is part of the company’s bank reconciliation...
How should an interest only loan be recorded? Defintion of an Interest Only Loan An interest only loan specifies that only interest payments are required during the life of the loan. No principal payment is required...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Standard Costing(Quick Test #2) Download PDF After you have answered all 35 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Payroll Accounting Payroll Accounting Payroll accounting involves the recording of a company’s: Gross wages, salaries, commissions, bonuses, overtime premium, sick pay, holiday pay, and vacation pay that are earned by...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
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...
Stockholders' Equity 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 provided. If you have...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
What is the significance of FOB Shipping Point and FOB Destination? Significance of FOB Shipping Point and FOB Destination The terms FOB shipping point and FOB destination have significance in accounting because they...
What is the cost of goods sold? Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income...
What is FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act. FICA consists of the U.S. Social Security payroll tax and the Medicare payroll tax. The FICA payroll tax is withheld from...
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
Would you please help me understand opportunity cost? You might think of opportunity cost as the profit you had to forego. Let’s illustrate this with a little story. Suppose that you are the sole owner of a company...
Chart of Accounts 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 provided. If you have...
What is net realizable value? Definition of Net Realizable Value Net realizable value (NRV) is the cash amount that a company expects to receive. Hence, net realizable value is sometimes referred to as cash realizable...
What is the difference between an implicit cost and an explicit cost? Definition of Implicit Cost An implicit cost is present but it is not initially shown or reported as a separate cost. Definition of Explicit Cost An...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
What is meant by events after the balance sheet date? Definition of Events After Balance Sheet Date Events after the balance sheet date are significant financial events that occur after the date of the balance sheet but...
Working Capital and Liquidity Working Capital Working capital is defined as current assets minus current liabilities. Therefore, a company with current assets of $43,000 and current liabilities of $38,000 has working...
Stockholders' Equity(Quick Test #2 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for...
Financial Ratios (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (45) Marked Wrong (0) Marked Right (0) financial ratios These relate one amount to another amount. For example, earnings might...
Payroll Accounting (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (37) Marked Wrong (0) Marked Right (0) FICA (or) Federal Insurance Contributions Act This is the combination of the Social...
Financial Accounting Financial Accounting Financial accounting is a type or branch of accounting that begins with the recording, sorting and storing of a business’s transactions in accounts contained in its general...
What is the difference between vertical analysis and horizontal analysis? Definition of Vertical Analysis Vertical analysis expresses each amount on a financial statement as a percentage of another amount. The vertical...
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...
Payroll Accounting(Quick Test #2) Download PDF After you have answered all 25 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of 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...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
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