months A magazine publisher receiving money from a subscriber for magazines for the following year A website design company receiving a client’s down payment for future work A law firm receiving a retainer fee from a...
months A magazine publisher receiving money from a subscriber for magazines for the following year A website design company receiving a client’s down payment for future work A law firm receiving a retainer fee from a...
Other increases in long-term liabilities and stockholders’ equity Uses of cash reported in the financing activities section of SCF include: Repayment of short-term loans and/or long-term loans Retirement of bonds...
offering a credit customer an early-payment discount of 2% for paying an invoice in 10 days instead of paying the full amount in 30 days. In this example the supplier is giving up 2% of the invoice amount in order to be...
. The amount of petty cash will vary by company and may be in the range of $30 to $300. The petty cash is controlled through the use of a petty cash voucher for each payment made. The expenses will be recorded in the...
in the general ledger account Purchase Discounts.] Example of Discount on Purchase of Office Furniture Assume that a company purchases furniture for the office of a newly appointed executive. The cost of the furniture...
of the 20 six-month time intervals. Another example of an ordinary annuity is a mortgage loan having a fixed interest rate and a series of equal monthly payments. For instance, a 15-year mortgage loan will result in an...
is received from the customers. Expenses are reported on the income statement in the period when they match up with the related revenues, occur, or expire, which is often in a period different from the period when the...
Are sales discounts reported as an expense? Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are...
, it debits Cash. Every transaction will require a debit to at least one account and a credit to at least one other account. Here are two examples to illustrate our five tips. A bakery records its cash sales at a local...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
entitled Petty Cash when the petty cash fund is established. Example of Petty Cash Affecting Expenses Assume that the petty cash money is used to pay postage of $10. While the company incurs this cost at the time of...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
What are sales discounts? Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. Sales discounts...
What accounting entry is made when a company receives an order for its goods or services? Definition of Accounting Entry When an Order is Received At the time when a company receives a customer’s order (without...
What is a defined benefit pension plan? A defined benefit pension plan is a retirement plan in which the employer commits to paying a specified monthly payment to each eligible employee when he or she retires at a stated...
of the following methods of preparing the statement of cash flows is used by the vast majority of U.S. corporations? Select... Direct method Indirect method View Coaching The vast majority of U.S. corporations use the...
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...
basis, such as $50,000 per year. Many employees working in a company’s general office will be paid a salary. Often the salaries are paid semi-monthly. That is, one pay date will be the 15th day of the month for...
to the date of the sale. Next, the asset’s cost and its accumulated depreciation are removed from the accounts. Any money received is debited to Cash and any gain or loss on the sale is also recorded.] Example of a...
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...
accounts as of the final moment of the date shown in the heading. Note: Typically the final moment of the balance sheet is the last instant of the last day of an accounting period, such as midnight of December 31, June...
and reduced the company’s net income (or increased its net loss), but the depreciation amount did not involve a current period cash payment. For example, if a company purchased equipment in the previous year for...
for calling on customers. For this service, New Corp agrees to pay commissions of 5% of sales with payment made 10 days after the month ends. Assuming that December’s sales are $100,000 New Corp will be incurring...
to approving a vendor’s invoice for payment, the invoice, receiving report, and __________ order should be compared. 3. A supplier’s invoice for $1,000 is received on June 1 and has terms of 1/10, net 30. If...
. Mark as wrong Mark as right vendor This is another term for supplier. vendor This is another term for supplier. Mark as wrong Mark as right early payment discount (or) cash discount This is another term used for the 1%...
income statements. interim income statements These income statements are issued for periods other than the official annual income statements. An example is the quarterly income statements. Mark as wrong Mark as right...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
by the inventory turnover ratio DSI = 360 divided by 4.2 (see question #10) Days' sales in inventory = 85.7 days 12. When a company offers an early payment discount of 1/10, net 30, the cash discount is...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
from Equipment to Repairs Expense.” Reclassification can also be used to describe moving a note payable from a long-term liability account to a short-term or current liability account when the note’s maturity date...
Where are short-term bank loans reported on the statement of cash flows? Definition of Short-Term Bank Loans Short-term bank loans are generally loans that must be repaid within one year of the date of the balance sheet....
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
What is a noncurrent asset? Definition of Noncurrent Asset A noncurrent asset is an asset that is not expected to turn to cash within one year of date shown on a company’s balance sheet. (This assumes that the company...
What is a journal? Definition of a Journal In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry. The...
premium. The balance in the account Prepaid Insurance will be the amount that is still prepaid as of the date of the balance sheet. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
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